Preamble

The House met at half-past Nine o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Mr. Paul Tyler: On a point of order, Madam Speaker. I seek your advice and guidance. On page 167 of "Erskine May", the author writes:
In the Commons no place is allotted to any Member: but by custom the front bench, on the right hand of the chair, called the Treasury bench or government front bench, is appropriated for the members of the administration. The front bench on the opposite side, though other Members occasionally sit there, is reserved by convention for the leading members of the Opposition. It is not uncommon for senior Members, who art constantly in the habit of attending in one place, to be allowed to occupy it as a matter of courtesy.
I draw three matters to your attention, Madam Speaker. First, two weeks ago hon. Members from the Conservative Opposition placed green cards on the Opposition Front Bench and attended Prayers in preparation for Scottish questions. I drew the matter to your attention, and hoped that, as I had done so, you would accept that a precedent had been established and green cards could be placed on that Bench.
Secondly, there is nothing either in "Erskine May" or in any Standing Order that I have been able to obtain that allocates any other Bench behind the Opposition Front Bench to any particular Member from any particular party.
Thirdly, accepting that there seemed to be no precedent to prevent us from doing so, my colleagues and I put green cards on a number of spaces in preparation for this afternoon's Budget debate. My colleagues came here this morning to pray in those places, expecting that that would establish their position for the business of the House today.
I seek your guidance, Madam Speaker. It is not my intention to cause difficulty today—[Laughter.]. I simply want to establish that this Parliament is in one respect different from the previous Parliament, and, indeed, from any recent Parliament, in that there is a substantial large block of Members from a third party.
With the help of the Library I looked up the records, and found that when that was last the case, in the 1920s and 1930s, the leader of the then Liberal party spoke regularly from the Front Bench. I ask your guidance, Madam Speaker, as to how the will of the electorate as expressed at the general election can be properly reflected in places in the House.

Mr. Peter Bottomley: Further to that point of order, Madam Speaker. May I ask you to reflect on two things? First, the matter is one which hon. Members ought to be able to sort out without involving the Chair—as on the occasion several weeks ago, when I placed a green card in the place at present occupied by the

hon. Member for Bath (Mr. Foster). The Liberal Democrat Chief Whip rang me and explained what had happened before, so I did not use the card and did not provoke an incident.
Secondly, there are occasions when an hon. Member comes to the House with a prayer card, to take a place which is later used by a senior member of his party, a matter which I hope can pass without comment. We must move on, and the Liberal Democrats should not do again what they have tried to do today.

Mr. Tony Baldry: Further to that point of order, Madam Speaker. The hon. Member for North Cornwall (Mr. Tyler) has been slightly disingenuous in his description of what happened today, and there are matters that touch directly on your authority. Having been in the Chamber since before 9 o'clock, I can describe what happened. My hon. Friend the Member for Worthing, West (Mr. Bottomley) is right that we should be able to sort out these matters, but that is not the case. The Serjeant at Arms and your Secretary came into the Chamber—making it clear that they were doing so on your instructions—and told senior Liberal Democrat Members that what the Members were seeking to do was unacceptable, as the Benches above the Gangway were reserved for members of the official Opposition, while those below the Gangway were a free for all for anyone.
Given that the Serjeant at Arms made clear to senior Liberal Democrat Members what your ruling was, it is a gross discourtesy, not to the House but to you, that five Liberal Democrats have sought to assert themselves on the Opposition Front Bench. I hope that the House will understand that the Liberal Democrat Members could have been in no doubt about your ruling. It is clear that senior Liberal Democrat Members either have not sought to assert control over junior Members or have deliberately flouted what you said.

Mr. Dale Campbell-Savours: Further to that point of order, Madam Speaker. I have been in this House for 18 years, and the system of prayer cards is an abuse of our procedures, which should be brought to an end. The reality is that many hon. Members come into the Chamber allegedly to pray, but, in fact, all they are doing is booking their seat for the day. We all know that that is true and we should stop it. I ask you to set in train an inquiry into how that matter can finally be resolved. If I want a seat in this House, I will come in and take it. If a prayer card is on the seat that I have selected, I will remove it in the event that the Member has not turned up to pray.
What happens is an abuse and I appeal to you to bring this silly practice to an end immediately.

Mr. Menzies Campbell: Further to that point of order, Madam Speaker. I seek your guidance in respect of the proper construction to be placed on the passage in "Erskine May" to which my hon. Friend the Member for North Cornwall (Mr. Tyler) referred. You will be aware that the passage refers to the fact that the Opposition Front Bench
is reserved by convention for the leading members of the Opposition.
Am I correct in saying that the convention has force only so long as it is universally recognised within the House, and that if it fails to continue to have universal


recognition, its effect as a convention is diminished? Am I also correct in saying that if an hon. Member breaches Standing Orders, the Chair has the opportunity, the right and the obligation to exercise certain disciplinary powers? If there is a breach of convention, am I correct in saying that those powers are not available to the Chair?

Mr. William Cash: Further to that point of order, Madam Speaker. In respect of the convention described by the hon. Member for North Cornwall (Mr. Tyler), the critical issue is that it is defined by reference to the reason for the rule. The reason for the rule is, undoubtedly, to allow the proper conduct of business in this place. The official Opposition sit where they always do to deal properly with the business of the House. In that context, the Liberal Democrat Members are out of order, as the business of the House cannot be conducted if they remain in their place.

Mr. Nicholas Winterton: Further to that point of order, Madam Speaker. Unless I misheard him, the hon. Member for North Cornwall (Mr. Tyler) said that, from time to time, the Opposition Front Bench could be occupied by senior Members of this House. I am looking at Liberal Democrat Members, and in no circumstances could any of them be described as a senior Member of this House. Am I right that the success of Parliament and this House of Commons—and of this Chamber in particular—is based upon convention, tradition, precedent—

Mr. Michael Colvin: Trust.

Mr. Winterton: My hon. Friend is right. Is it not time that tradition, trust and precedent—which have led to the success of this House and made it the envy of the world—were implemented and honoured again?

Mr. Donald Anderson: Further to that point of order, Madam Speaker. I hesitate to intervene in a war on the Opposition Benches, but it does not really matter where a person sits for Prayers, because the Lord is no respecter of persons. However, it does matter for the convenience of the House. Therefore, it is proper for the official Opposition to sit in the appropriate seats. Equally, with a degree of good will on all sides, Benches should be reserved for the enhanced numbers of Liberal Democrat Members, and those Benches should properly be those above the Gangway. With a degree of good will on all sides—and without bothering you, Madam Speaker—the House can surely reach a decision.

Mr. Alex Salmond: Further to that point of order, Madam Speaker. As you know, I am a

very tolerant person, but it seems to me that common sense would dictate that we have either reserved seats or a free for all. I do not mind which it is, but it must be one or the other. We cannot have seats reserved for some and a free for all for others.

Mr. Julian Brazier: Further to that point of order, Madam Speaker. I am not sure whether Prayers have made us any better tempered. I wish to refer to the Dispatch Boxes. I have not been a Member for as long as some of the earlier speakers, but I understand that the Dispatch Boxes play a special role in the life of the House. It is traditional for Ministers to speak from one Dispatch Box and for the Leader of the Opposition, or his nominated subordinates, to speak from the other. Would it not be inconvenient for the House if the Leader of the Opposition and his immediate subordinates had to put prayer cards in each day to have access to the Opposition Dispatch Box?

Madam Speaker: Have hon. Members finished with their points of order? Good.
It is custom and practice that the Opposition Front Bench is reserved for the official Opposition, and I shall see that that is maintained. It is also custom and practice that the area below the Gangway is for the minority parties. I shall look at all the points of order that have been put to me this morning, but I have never known grown-up people to behave—[Interruption.] I want my voice to be recorded. I have never known grown-up people to behave in such a crass and childish manner. I think that it is time that Members of this House grew up. If they do not, I shall want to see the leaders of the Conservative and Liberal Democrat parties very soon.
I hope that those Members now on the Opposition Front Bench who are not members of the official Opposition will do me the courtesy of removing themselves right now while I am on my feet. [HON. MEMBERS: "Hear, hear."]
I am taking no further points of order. We have business in this House, and I hope that hon. Members will resolve this in the next hour and behave in a more adult fashion. I am ashamed of this morning's proceedings.

Mr. Phil Willis: On a point of order, Madam Speaker.

Madam Speaker: Is it on another matter?

Mr. Willis: No.

Madam Speaker: No, it cannot be on the same matter. I have made my ruling.

Small Retail Shops

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

Mr. Archy Kirkwood: May I take the House back to the less contentious issue of high street shops? I am grateful to the Minister for Small Firms, Trade and Industry for coming to the House to spend some time on these important matters. The issue may not be highly charged politically—and I do not want to make a highly charged party political speech of any kind—but it is important, early in the new Parliament, to recognise that there are problems facing small family retail businesses, particularly in the high street, throughout the United Kingdom. It is also an appropriate day to raise the matter, because the Budget may have significant ramifications and consequences for small retail businesses. The Minister has time to nip across the street before lunch and insert the odd paragraph in the Chancellor's speech. The importance of the financial or economic context in which small retail businesses must survive should be recognised.
At the time of the election, going around my constituency in south-east Scotland, I was struck by the number of people who were concerned about the blight that they felt was beginning to affect some high streets. They spoke of the acute need for support for the built environment throughout the nation. When I made further inquiries, I was surprised to find that that feeling existed not just in south-east Scotland, but throughout the country.
The Government said in their election manifesto that they were anxious to give small businesses a major role, and I hope that the Minister will recognise that retail shops are an important part of the small business sector. I am not talking about rural or village shops, or post offices; their needs were addressed in the previous Parliament. Nor am I thinking of shops in small towns. In the previous Parliament, the Select Committee on Trade and Industry produced a valuable report on larger conurbations; we await the Government's response, which I hope will be positive and will give succour to small retail shops. I am more concerned about small communities—market towns such as eight or nine in my constituency, including Hawick, Kelso and Jedburgh—containing between 5,000 and 15,000 people. The economic centre of such a community is its high street, where historically—for centuries, in many instances—the retail sector has existed.
Those high streets are the backbone of the local community, functioning as a social meeting place as well as providing retail goods. People need a place where they can meet and exchange news, views and gossip. Social intercourse is as important to the local community as the business that is done in the high street. In my constituency, there is a real danger of blight in such areas. Blight is a pretty drastic word, but the situation is now serious.
Once the problem had been drawn to my attention, I took note of what had happened in the recent past. One of the difficulties that bedevil the Government relates to the collection of statistics about, for instance, turnover and closures. There are some statistics—small newsagents

have been monitored carefully by their trade association, and the community pharmacy campaign has been investigating individual sectors—but I suspect that the Government will find it hard to establish the way in which the trends are developing and the problem is building up.
There is anecdotal evidence, however. Anyone who wanders along the high streets of the United Kingdom will see that the atmosphere of diversity, wealth and colour is not what it was. Most premises are occupied either by banks and other financial institutions or by off-licences, which are doing very well. I know that the Government are concerned about that. There is an increasing number of charity shops, which is also causing concern.
The reasons for what is happening are many, varied and complicated. As I said at the outset, the Budget is an important part of the equation: the economic climate is a vital aspect. In my area, there are signs that things are beginning to pick up. Long may that continue, and I hope that the Government will use this afternoon's Budget statement as an opportunity to promote such developments.
Sociological factors are also having a dramatic effect on the high streets. Increased mobility enables people to travel further in order to shop and I fear that the situation will get worse before it gets better. Competition from supermarkets has also had an effect. In some market towns, there is a supermarket at one end of the high street—serving a useful function, it must be said—and an open market with a car park at the other end, functioning at the weekends. Twin pressures are exerted by the organised power of big commercial businesses such as Sainsbury, and competition from market traders and stallholders. Those pressures may have been underestimated in the past. Transport policy is another problem. The difficulty of convenient parking on the high streets is a major disincentive: in the past, people were much more willing to walk to and from shopping centres.
One of the main reasons why some high streets have suffered so much is that, because of financial constraints, local authorities have found it difficult to organise strategies to enhance local areas and underpin the high street environment. I hope that, if it achieves nothing else, this debate will lead to the recognition that not just central Government but local authorities have a vital role to play. I hope that the Government will acknowledge that. I also hope that central Government and local authorities will consider the effect of non-domestic and water and sewerage rates on the economic viability of some small family businesses.
I know that it will not be easy, but it would be a real step forward if a tax system could be established for the small retail sector that was more directly related to profitability. At present, if some of the small family businesses in the high streets of my town were required to pay rates on the basis of what they had earned at the end of the year, they would be receiving handouts from the local authority. Some are on the very margins of profitability. The issue is not simple and it is not new, but this Parliament should give it urgent attention.
Local authorities have an important function in setting the rules for planning and development. The previous Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer), is a man with whom I have little in common, but he did some sensible work—perhaps too late—in trying to redress the


balance between town centres and out-of-town supermarket development. The physical environment is extremely important for our high streets.
Tourism is an extremely and increasingly important industry and is promoted by a positive high street environment. Tourists look forward to being able to take advantage of a pleasant and interesting high street; those in south-east Scotland are not finding what they expect. We ignore at our peril the impact on the tourist industry of letting our market town centres fall into too much decay.
Corner shops and high street shops are increasingly a soft target for crime. The plate-glass window is an inviting target on Friday nights when people have drunk too much and are showing youthful exuberance, to put the kindest possible construction on it. The insurance companies have begun to put enormous premiums on replacing those windows, some of which are curved and extremely expensive. That knocks the stuffing out of family businesses that have to replace glass at great cost three, four or half a dozen times a year and to pay increased premiums. That is dispiriting, debilitating and demoralising.
In the middle term, the next 10 or 15 years, we face the prospect of additional pressure from electronic shopping. Information technology is moving on and we have electronic banking. The President of the United States was properly encouraging people to think about global marketing for small companies, and there may be some advantages in that, although I do not see how the sale of children's shoes in the high street could gain much benefit from access to the Internet.
None of those points will be new to the Minister, but they are worth putting on the record. The problems are getting worse and putting increasing pressure, day by day and month by month, on people trying to earn a living as retailers in small market towns.
My constituents are concerned about charity shops. I understand the emotional reaction, as people are worried that their high streets and market squares are being taken over by those shops and feel instinctively that they are responsible for the degradation. That analysis is superficial and wrong, because charity shops have a valuable role to play.
My generation and that of my parents and grandparents had more extended families and a hand-me-down system of recycling children's clothes, and five or 10 years ago some local charity shops were offering a valuable service in replacing that system, but things have moved on a long way since then and major national charities with big merchandising departments now take advantage of rate relief and the empty spaces in our high streets. Of course, we all support the causes for which they raise money, and I recognise, because they tell me so with monotonous regularity, that they are also under great pressure because of the national lottery.
The extent to which charity shops are filling gaps in high streets is beginning to be a matter for concern. The Government should examine carefully some of the rate exemption rules and whether they are being observed as punctiliously as they should be. I have no evidence for it, but my constituents feel that charity shops are taking unfair advantage of some of the exemptions.
Charity shops have an indirect impact on the downward spiral in high streets because they can afford rents that would fall if they were not there; in their absence, the owners of empty shops would be prepared to consider rent reductions to a level at which a bona fide small family business would be viable. They are unwittingly distorting free market processes.
We do not want to be antipathetic to charities and we want to keep the best of what they provide in our high streets, but we must recognise that there are now too many of them and that they have an indirect collective effect on the economies of our high streets.
I accept that it is not easy for the Government to have a hands-on, direct impact and transform the situation overnight—there are many underlying causes of the problem and the background is complex—but will the Minister acknowledge that there is a difficulty? I am sure that she does not need any extra tasks, but I hope that she will commit herself to a serious examination of the problems and lend a listening ear to those in the sector.
One of the problems that bedevil the sector is the fact that it does not have a united voice and an overarching view; it does not have access to the public relations machine of Sainsbury and other supermarket chains. The Federation of Small Businesses does valuable work, but it finds it difficult to bring together the many strands of the sector to give it the authority that it would like.
Will the Minister explain how the Government intend to deal with the cross-departmental nature of the problem? She is not in control of crime or local government, so the House would be grateful if she could explain how the different departmental perspectives can be brought to bear on the problem. On Budget day, we do not need to be told again that there are difficulties with money, but a little pump priming could go a long way.
A cross-departmental task force would give us some confidence that the Government are serious about dealing with the situation, although I know that they are reviewing much of the legislation, and one would expect nothing different from a new Administration, after 18 or 19 years of government by another party.
Although others have tried before her, will the Minister consider the problem of how non-domestic rates are unrelated to profitability? We have precious little time to find a solution to that, if we are to make some positive improvements to the lot of small retail businesses. The Minister should consider the use of local partnerships, probably spearheaded by local authorities, which could be pump-primed. That would enhance the built environment. Local enterprise companies also have a role to play in encouraging small projects to renew the built environment of high streets.
It is a hard but important task. I hope that the Government will commit themselves to studying the matter seriously during the current Parliament. They should work with those who represent the needs of small businesses in high streets to make some progress. I know that my hon. Friends and I will be constantly at the Government's shoulder to put pressure on them at every opportunity, so that the problem can be addressed robustly and effectively in the years to come.

Mr. Frank Roy: Thank you, Mr. Deputy Speaker, for allowing me to speak in this important debate, which has great relevance to the people


of Motherwell and Wishaw. I agree with much that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) said: there is a need for a coherent policy for town centre regeneration.
The need for a coherent policy to encourage small retail shops is abundantly clear, especially in the main street of Wishaw. The retailers of Wishaw have been left to pick up the crumbs left from years of industrial decline and falling disposable incomes. At the same time, they have had to face the problems of spiralling overheads and a dwindling customer base.
The debate also allows me to make my maiden speech in the mother of Parliaments. I have the great honour to be elected as the first locally born and bred Labour party Member for the constituency of Motherwell and Wishaw. To be able to represent the community in which one has been brought up and where one lives is a great honour and it is a source of great pride not just to me, but to my family, friends and neighbours.
I should like to acknowledge the members of the Motherwell and Wishaw constituency Labour party who worked tirelessly for my election. I should also like to thank the voters of Motherwell and Wishaw who gave me and my party their trust on 1 May. I look forward very much to working on their behalf in the years to come.
The man whose footsteps I follow, Dr. Jeremy Bray, is not only my predecessor but a close family friend. I was his parliamentary election agent in the general election campaigns of 1987 and 1992. I am sure that all hon. Members would like to join me in wishing Jeremy and his wife, Elizabeth, a long, happy and healthy retirement.
Jeremy Bray was born in Hong Kong in 1930. He enjoyed a truly global education, which started at Eastnor village school in Herefordshire. He then attended Clefoo missionary school, China; Aberystwyth grammar school; Kingswood school, Bath; Jesus college, Cambridge and, finally, the illustrious Harvard university. He was a journalist, economist, mathematician and author.
Jeremy first entered Parliament as the Member for Middlesbrough, West in 1962. In 1965, he led the campaign against cigarette advertising. It seems that it has taken some of us nearly 32 years to catch up with Jeremy's advanced thinking.
My predecessor enjoyed various stints as Parliamentary Secretary—in the Ministry of Power in 1966 and in the Ministry of Technology in 1967, a post which he held until his resignation in 1969. He lost his seat for Middlesbrough in the 1970 general election, but re-entered Parliament as the Member for Motherwell and Wishaw in October 1974. Later, the constituency was renamed Motherwell, South. He was reappointed Labour's science and technology spokesman in 1989 and held that post until 1992.
To me, Jeremy Bray's finest performance in the Chamber was in April 1990 when, still recuperating from a life-saving heart bypass operation, he determinedly turned up to speak in defence of his constituency steelworks at Ravenscraig. Those works and its 10,000 steelworkers ultimately suffered from what they described as a death by a thousand cuts. To his great credit, Jeremy fought against every cut along the way. I had the honour and privilege to be Jeremy's parliamentary election agent and I now have the even greater honour of being his successor.
Until recently, Motherwell and Wishaw was at the heart of industrial Scotland. Indeed, to many we were the heart of it. The area played an integral part in a proud industrial heritage. That heritage gave conception to the famous steelworks of Lanarkshire, Dalzell, Clyde Alloy and Ravenscraig. They all played a crucial part in the manufacturing sector of Scottish life but, today, after years of dereliction, only Dalzell remains in operation.
The steelworks had a fiercely proud and efficient work force who prided themselves on their steel-making expertise. Indeed, as a Ravenscraig steelworker for 14 years, I hope that in my new parliamentary career I am able to find the same level of friendship, honesty, professionalism and dedication among my fellow parliamentarians as I did among my fellow steelworkers at Ravenscraig.
When those same steelworkers were about to retire or be made redundant, they used to say, "Listen son. You can take the man out of the steelworks but you can't take the steelworks out of the man." How right they were.
Motherwell and Wishaw, and Lanarkshire as a whole, might have lost the steelworks, but we have not lost our steel determination to rebuild our communities and create a new dynamic base for the manufacturing service sectors that will become the new heartbeat of our resurrection from industrial decay and decimation. Our small retail shops have a major part to play in that resurrection.
The regeneration of Motherwell and Wishaw, and of Lanarkshire, has already started. Inward investors realise the potential of an area where workers have shown their ability to adapt to modern technology and work practices. The area, which is at the heart of west central Scotland, is rich in skilled labour and modern purpose-built units and has a first-class infrastructure. It is an area in which people look after their neighbours and recognise the importance of family ties. They genuinely want to create a better life style for their children and their children's children.
Motherwell and Wishaw is made up of two towns with their own distinctive areas. Forgewood, Jerviston, Flemington and Muirhouse are among those in Motherwell and Craigneuk, Netherton, Coltness and Pather are among those in Wishaw. The constituency is also home to the old mining communities of Cambusnethan, Waterloo, Overtown, Carfin and New Stevenston on its outer edges.
As hon. Members have probably gathered, Motherwell and Wishaw is not an area of leafy country villages and rolling meadows, but it is a constituency with a heart and with feeling. It has a steel determination to rebuild itself for the new century and the new millennium. As a new Labour Member with a new Labour Government, I very much look forward to playing my part in its resurrection.

Mr. Colin Breed: I congratulate the hon. Member for Motherwell and Wishaw (Mr. Roy) on his maiden speech. His comments about Ravenscraig will have struck a great resonance in many of Cornwall's tin miners, who suffered at the same time—it was not that long ago. I remember our feelings of solidarity with that part of the country although, of course, we were a long way away from it.
Small family retail shops have been the mainstay of shopping centres for decades and have provided jobs that contributed directly and indirectly to the local economy.


Until recently, a number of small shops in my constituency took produce from local suppliers up and down the Tamar valley, where small horticultural operations provided them with fresh fruit and vegetables, but the rapid decline of the small shops and the prosperity of our town centres has knocked out many small horticultural operations and so caused even more job losses. The combination of high rents, the foolish introduction a few years ago of so-called upward only rent reviews, the imposition of the uniform business rate and the extraordinary growth of out-of-town supermarkets even in very rural areas have all contributed to the loss of small retail concerns from our high streets.
The latest competition, as my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) mentioned, comes from charity shops. I am certainly not against charities trading in the high street. In many respects, they provide a useful service to the community, but their enormous growth in recent years has had some detrimental effect. They have affected some towns in Cornwall, where they have put out of business long-standing second-hand shops and shops that traded in used furniture. They are helped by their ability to use voluntary labour and to receive business rate relief. They sometimes pay higher rents, but they can also pay lower rents because of the value of covenants on leases. Many landlords greatly value the opportunity of leasing premises to a national charity rather than to a small family firm that may be considered vulnerable. All that makes for uneven competition.
Many local councils try to raise additional income—using one of the few means possible—from their car parks. As local councils' responsibility for the rates of retail operations has been removed, they have raised car parking charges. Perhaps they have had slightly less interest in the health and prosperity of the main street because of the operation of the uniform business rate. Not unnaturally, more shoppers choose to avail themselves of free parking in out-of-town centres, being unwilling to pay ever-increasing car parking charges in our towns.
Sales by small retailers have declined considerably over the past 10 years with the rise in out-of-town retailing, and more and more in-town units are being left empty.

Mr. David Heath: I agree with my hon. Friend about the effect of the uniform business rate on smaller towns. Does he agree that a significant problem for market towns in constituencies such as ours is that they fall between the assistance that is available from the Rural Development Commission, rural development area status and so on, and the urban programmes that apply to larger towns? While that does not fall within the responsibility of the Minister, she may wish to make that point to her colleagues. Our market towns are suffering from competition from larger conurbations.

Mr. Breed: I agree with my hon. Friend. That is one of the many issues that need to be addressed in a comprehensive review.
The situation in the high street has been made worse recently by the amalgamation of building societies, some of which have moved from the high street, and the

reduction of the number bank branches. Often, such units are harder for ordinary retailers to occupy. They stand empty, gathering dirt and dust and creating blight on the high street. Town centre planning policies must take account of those new developments, which affect almost every high street in every town. They are changing the shopping scene and the way in which we use our high streets.
I hope that the Government will urgently consider ways to support the remaining small retailers. They have a distinct function, particularly in respect of competition. They are fighting a difficult battle, but if there is not to be a further drift to what would be almost a monopoly for the large supermarket retailers, which now have some 60 to 70 per cent. of all retail sales, some provision needs to be made for small retailing units in our high streets.
The former Government recognised the problems of small village post office stores. Many grateful post office storekeepers in my constituency were very pleased. Although it came rather late in the day and was rather modest, that initiative addressed the problems. Virtually the same problems are hitting our high streets. Some towns are considering the use of town centre managers to co-ordinate the activities of retailers in the high street by bringing them together to market themselves more forcefully to local consumers to provide some measure of competition for large out-of-town retailers, but they need additional assistance. If the retailing centres that form a valuable part of our smaller towns are not to decline further and family businesses are not to continue to close, they need support.

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): This has been an important and interesting debate. I congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on having chosen the topic. I thought that the debate would range far and wide, and it did, but it focused on some real concerns. Many issues were raised and much of what the hon. Gentleman said chimed with what was said by other hon. Members. I hope to be able to respond as fully as possible. The headline topic for this debate is small retail shops. The feelings expressed by many hon. Members show how socially essential we believe small independent retailers can be.
We had the privilege of hearing the excellent maiden speech of my hon. Friend the Member for Motherwell and Wishaw (Mr. Roy). He paid a sincere and well-deserved tribute to his predecessor, who is a friend of us all. I have no doubt that what he said about his constituency, his pride at having been born and brought up there and his great feeling for the area will mean that over the years he will be a fine and able representative and make an outstanding contribution to the work of the House. We also heard a good contribution from the hon. Member for South-East Cornwall (Mr. Breed), who echoed some of the concerns that have been mentioned.
The contribution of this vital sector is important. Small retail shops provide the variety, choice, vitality and diversity that consumers desire. It is that vitality, diversity and convenience which the public—the people we represent—miss so much when those shops disappear. I shall explain later how the new Government are determined to improve matters by forging an effective partnership with all sectors of business in this country.
I shall first put the United Kingdom's retail sector into context. Retailing is vital to our economy. Sales of about £160 billion mean that it accounts for almost one quarter of gross domestic product expenditure. Retailing gives direct employment to almost 2.5 million people, with many others providing services to support that activity. The retail sector also accounts for more than 30 per cent. of the UK's commercial property portfolio. Those are impressive statistics.

Mr. Kirkwood: It is helpful to place the sector in context and show its importance and value, but is the Minister satisfied that the statistics available to her are disaggregated to the extent that she can identify what is happening in the high street? The statistics are important and powerful, but I suspect that the vast majority of that value is generated by much bigger businesses than some of those on which we are focusing this morning.

Mrs. Roche: It is interesting that those independent outlets contribute about 25 per cent. of the figure—they play a significant part.
Today's debate has provided us with an opportunity to acknowledge the significant part that small retailers play in our day-to-day lives. Many people enjoy having the daily newspaper delivered through their front doors, although I suspect that hon. Members' enjoyment depends on what the daily newspaper has to say. Unlike the independent newsagent, however, we do not have to get up at 4 or 5 o'clock in the morning to organise deliveries. At the other end of the day, when people drop in at their local convenience store to buy essential items that they need, they may meet a shop owner who has already been working for more than 12 hours. It is a hard, competitive and difficult life. As the hon. Member for Roxburgh and Berwickshire and others have said, competition from larger supermarkets and other retailers has made business even tougher.
The hon. Members for Roxburgh and Berwickshire and for South-East Cornwall mentioned the problem of crime, which is a real problem for many of our small retailers. The Forum of Private Business, one of our small business organisations, has done a great deal of valuable work on this subject, which is a matter of concern. There clearly needs to be close co-operation between the police, local authorities and the business community to ensure that our town centres are as safe as possible. I know that when my right hon. Friend the Home Secretary introduces the crime and disorder Bill in the near future he will have those considerations very much in mind.
The reasons why retail competition is so strong are as many and varied as the topics in today's debate. Changing life styles and expectations, differing family circumstances, new product ranges and consumer services, the growth of supermarkets and other large stores, have all combined to produce a dynamic sector. If one stands still in retailing, as in any business undertaking, one loses ground.

Mr. Andrew Stunell: The Minister spoke about crime, a subject which causes as much concern in small shopping centres as in large town centres. The outgoing Administration made grants available through the Home Office for closed circuit television in many centres. Does the Minister agree that that programme should be developed and extended in future? There is plenty of scope for partnership between

local authorities, retailing organisations and local traders groups, but financial prompting is often needed. Perhaps the Government will see their way to providing it.

Mrs. Roche: In opposition, we always supported closed circuit television, which can be very useful. In the Wood Green shopping area in my constituency, we are about to install closed circuit television after an enormously successful pilot project. A possible assault on a police officer was prevented and a missing child was returned to its parents. I agree that close co-operation between all the major players is necessary and I will bring the hon. Gentleman's remarks to the attention of my right hon. Friend the Home Secretary.
While considering the good things that the sector has to offer, we must acknowledge that there has been a substantial reduction in the number of retail businesses in the past 10 years. Almost 50,000 retail businesses have disappeared in that time, the vast majority of which have been single shops. While some of those businesses may have been taken over by larger retailers, the hon. Member for Roxburgh and Berwickshire graphically described, through the example of Hawick, what many hon. Members will also know from their constituency mailbags and surgeries—that a large number of those small retail businesses have been forced to close. That has brought severe hardship to the shop owners and their families, as well as in many cases the loss of lifetime savings and even retirement nest eggs. The policies of the previous Administration have certainly contributed to the pain suffered by independent retailers.
I do not intend to dwell at length on the failures of the previous Administration, but I feel that I must comment on the approach taken to planning policy, an important subject which the hon. Member for Roxburgh and Berwickshire outlined. The latter part of the 1980s saw a virtual free for all on retail planning which led directly to the disappearance of high street diversity and a reduction in consumer choice. I acknowledge that two attempts were made in this decade to reimpose tighter retail planning guidelines and that the sequential test for new retail shopping developments, together with impact assessments, now provides local planning authorities with a much sounder base against which to judge planning applications.
As my ministerial colleagues have made clear, we do not propose to review the English retail planning guidelines at present, although we are concerned to see them applied firmly and consistently and to monitor their effectiveness. However, the review of the Scottish retail planning guidelines which started in March is continuing.
Those stricter guidelines were too late, however, to save many small independent retailers. It was a classic case of leaving the stable door open for too long. While I accept that consumers have welcomed some of the new out-of-town developments, the consequences of the then Government's planning guidelines for small high street retailers cannot be over-estimated. There are too many examples of shopping centres and high streets closing. People do not go to areas where there are boarded up shops, and a vicious circle is created. People do not want to go to shops in those areas, so the shops close and crime proliferates. We all have experience of that as constituency Members of Parliament.
What do the new Government want to do? First, we have made it abundantly clear that we regard small firms as vital to the success of an enterprise economy.


A healthy, vibrant small business sector creates wealth and employment and generates new ideas and products—small retailers fall within that category. We are determined to deliver the right conditions so that small retailers and other small businesses can thrive and grow.
The Government are firmly committed to making Britain a prosperous and competitive nation. Last month, my right hon. Friend the President of the Board of Trade outlined the Department's agenda to achieve that. It is a programme to forge a real and effective partnership with business. The "Competitiveness UK" agenda comprises a number of different elements and I assure hon. Members that the role of small and medium-sized enterprises, especially small retailers, will be part of that agenda.
Unified business rates have been mentioned today and there is no doubt that the system is widely disliked and perceived as being unfair. That message came out loud and clear at the "Your Business Matters" conference set up by the previous Government. It also emerged from the report undertaken by the Institute of Directors, which brought together some of the comments made during that consultation process. The small retail sector has certainly had to bear the burden of that system.
We are committed to carrying out a full consultation with the business community about returning to a locally set rate. One of the advantages of localising the system is that it gives a locus for the major partners—local authority, police and business community—to get together on many issues, such as closed circuit television, cleaning up town centres or other exciting initiatives in the high street. Where the local authority, police and business community—especially the small retail sector—all work together, the effect in terms of delivering an enhanced service cannot be underestimated and we strongly support such collective efforts.
Several hon. Members mentioned the growth of charity shops—an issue which is frequently raised by the retail sector. Our debate has been a well-balanced one and it has been acknowledged that the alternative to the presence of charity shops would probably be vacant premises, boarded-up shop windows and a generally rundown appearance. However, I also understand the strength of feeling among small retailers who regard charity shops as unfair competition.
This is a sensitive issue and Parliament has previously recognised the importance of charity shops to the fund-raising efforts of charities. In the United Kingdom, we are proud of the generous support that so many people give to various charities. Specific legislation allows, in certain circumstances, a partial and discretionary relief on rates. Charity shops are, of course, a valuable source of revenue for the charities concerned and I am sure that we have all seen reports of how charities' funds have dropped dramatically recently. Charity shops often enjoy the benefits of being staffed by volunteers and of reduced rentals for the property.
I can only say that we have no plans at present to change the current overall position on charity shops, but we will keep in close contact with hon. Members on both sides of the House who wish to raise these issues and with the business community in general and the small retailers sector in particular.
I have already touched on town centre improvements. Combinations that bring together local authorities, police, business, chambers of commerce and other organisations help town centres to grow and prosper.
We will also work within Europe to ensure that British views are heard and respected. We will shortly complete the Government's response to the EU Green Paper on commerce, which was published late last year. Cross-departmental work was mentioned and I assure the House that, in co-ordinating the Government's response, we are ensuring that such work and consultation take place.
We shall also be seeking other ways to help the UK retail sector where resources permit. I was very pleased that among the recent announcements of winning bids in the sector challenge was a successful bid from the Booksellers Association. The Booksellers Association project is based around improving members' competitiveness by creating an Internet site which delivers information both to members and to the public. The association has a broad membership of which some 2,000 are single site shops and a key objective of the project is to ensure that those small retailers add value to their businesses by helping them to compete more strongly.
We are also considering a proposal for support for a project aimed specifically at small grocery shops. The project will aim to increase the awareness of the benefits of using modern technology in those shops. I am sure many hon. Members will wish to join me in paying tribute to the small grocery shops which, in many towns, are the cornerstones of their communities and, moreover, are now run by members from our ethnic minority communities. They make a great contribution not only to the commercial viability of our towns and villages, but to the social fabric of our lives. Pensioners and other people who may not have ready access to a car find such shops extremely helpful.
New technology has been mentioned and I believe that it can play a significant part in the lives of small retailers. I recently visited a well-established, family-run business in my constituency and went behind the scenes to see how everything was baked fresh on the premises. New technology is playing its part in that business.

Mr. David Heath: Has the Minister's Department considered the potential of lottery terminals which, for better or worse, are in many shops nowadays? They are an underused information technology connection which could provide a much wider shop floor to isolated or small shops. Is that something her Department has considered?

Mrs. Roche: No, but I was about to say that in our manifesto and in the documents on the small firms sector that we produced in the run-up to the general election we discussed our ideas for what we called the enterprise zone, whereby small and medium-sized enterprises could be put on-line with a dedicated site on the Internet. In that way, small businesses would have access to information that might be of great use to them. If the hon. Gentleman will write to me on that subject, I shall be only too pleased to consider his comments and bring them to the attention of my right hon. Friend the Secretary of State for National Heritage. Plans for the enterprise zone are under way and the hon. Gentleman may find the proposals of great interest when they are launched.
The Government are also pushing forward with help for small retailers in respect of training. Advice and support are, of course, available to all firms through


training and enterprise councils—local enterprise companies in Scotland—and business links. Small firms may receive assistance to improve their in-house capacity to train or to work towards the investors in people standard. We certainly want to see more initiatives to help the independent owner-manager, because in the past owner-managers have been somewhat left out of some of the training initiatives. As the Minister responsible for small firms, I am concerned to ensure that we do not forget the training and skills that owner-managers wish to acquire as their businesses grow and prosper and they want to move forward.
A number of projects are already examining the needs of small retailers. Five projects involving groups of small retailers, under the skills challenge, are nearing completion. Meanwhile, a management development project currently under way in Lincoln aims to design and deliver a retail management development programme for owner-managers of small retail outlets. The programme also involves branch managers of larger retail organisations in Lincoln and the surrounding areas. The programme draws on sector standards and aims to improve the competence of the participants, thereby helping them to improve the performance and competitiveness of their stores. I welcome such projects. There is much to be gained in retailing and other aspects of business life from small and large firms working together for their mutual advantage.
We have had a very good debate today, although it is difficult to do full justice to the importance of the independent retail sector in such a short time. I nevertheless thank the hon. Member for Roxburgh and Berwickshire for bringing the subject to the House today; I also thank other hon. Members for their positive contributions.
I hope that I have shown that the Government are already taking action to help small retail shops and are determined to push on by tackling other areas such as business rates. That will involve many Departments working together in the type of co-operative initiative for which the hon. Gentleman has called. We shall make sure that that co-operation is enhanced; our response to the EU Green Paper on commerce gives us the context in which to do that.
There is clearly a great deal of interest in the House in this subject. We will certainly give it the full attention that it deserves. Our small shops are vital to life in the United Kingdom, and they deserve our support—and the support of constituency Members of Parliament at local level. I can assure the House that the Government will give these shops all the encouragement that they need to enable them to succeed: they deserve no less.

Sitting suspended.

11 am

On resuming—

Mr. Peter Lilley: On a point of order, Mr. Deputy Speaker. May I draw to your attention a very serious matter relating to the deliberate release of information about the contents of the Budget to journalists before the Budget has been delivered to the House? Can you confirm that the last time that a Labour

Chancellor deliberately released contents of the Budget that he was about to deliver in the House he subsequently felt honour bound to resign as Chancellor of the Exchequer?
Earlier today, I was contacted by journalists who told me that they had received explicit confirmation from the Treasury that the Budget would, among other things, include the abolition of tax relief on private medical care for the half a million elderly people in this country who provide for themselves. There is, I think, no precedent for the Treasury giving such advance briefing on such matters, and in today's Financial Times there is a statement that, following market stories about the possible abolition of advance corporation tax credit,
A senior member of the government said: 'The markets are bonkers … we are pressing ahead.
This is, of course, an extremely market-sensitive matter, as well as a matter affecting the authority of the House. Can you confirm that when, in the past, the contents of Budgets have been leaked by those who have not been authorised to do so, there have been police investigations of the matter? Would it not be appropriate in this case that you or Madam Speaker authorise an investigation, establish who is the
senior member of the Government
who has been leaking matters to the press on highly price-sensitive issues, have them brought to the House and have the details of your investigation brought to the House, so that we may know why the Treasury is now behaving in such an extraordinary fashion for which there is no satisfactory precedent?

Mr. William Cash: Further to that point of order, Mr. Deputy Speaker. On the occasion in 1947 when something similar occurred—leading to the resignation of Sir Hugh Dalton—subsequent to the matter being raised in the House a Select Committee on the Budget Disclosure was set up. As things develop today, as the information becomes clearer, would you not accept that that course should be followed and that the matter should be thoroughly investigated, because this is not only a matter which affects the markets but a great contempt of the House?

Mr. Denis MacShane: Further to that point of order, Mr. Deputy Speaker. You may recall that in September 1996 it was widely leaked in the press that profit-related pay would be phased out in the November Budget—which did happen—allowing a large number of companies to set up PRP scams before the Budget. No disciplinary action was taken against the Ministers responsible and no investigation was undertaken by the House or by the Treasury. This is synthetic froth; the House should get on to the debate.

Mr. Deputy Speaker (Sir Alan Haselhurst): First of all, it is not the responsibility of the Chair to rule on matters which occurred in the past. As to the present matter, it seems to me that it is a Government matter and not one on which the Chair can rule as to what has happened. Ministers will have heard what has been said and doubtless there will be opportunities, today or subsequently, for further comment on the matter.

Hon. Members: Now.

Sir Patrick Cormack: On a point of order, Mr. Deputy Speaker. You will be presiding over


the Budget statement this afternoon and in your capacity as Chairman of Ways and Means you must surely be deeply disturbed by what has been said by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). May I ask you to suspend the sitting to make investigations and then to report back to the House as to whether you are satisfied that the Budget has been leaked? If it has, it is a situation wholly without precedent because, despite what my hon. Friend the Member for Stone (Mr. Cash) correctly said about the late Dr. Dalton, the circumstances in that case were very different.

Mr. Deputy Speaker: I do not believe that this is a matter on which the Chair can rule. If the alleged leak has taken place, it is a matter for the Government to pursue; it is for the Chair to determine that the Budget statement will still be delivered in the normal way.

Mr. Lilley: Further to that point of order, Mr. Deputy Speaker. I entirely accept that this is a matter relating to the Government, in that the Government are the culprits, but the point made by my hon. Friend the Member for Stafford—

Sir Patrick Cormack: Stone.

Mr. Lilley: I am sorry. The point made by my hon. Friend the Member for Stone (Mr. Cash) was that on previous occasions such things have been dealt with as a matter for the House and investigated by a Select Committee of the House. Surely it would be appropriate to consider whether we should take similar procedures on

this occasion to investigate the deplorable insult to the House and the dangerous treatment of the markets by the Government.

Mr. Dale Campbell-Savours: Further to that point of order, Mr. Deputy Speaker. What is the position? No allegation has been made by a member of the Opposition that the Chancellor of the Exchequer leaked the Budget. That has not been alleged. What has been alleged is that some minor official in the Treasury may have made a statement that was subsequently commented on by a member—possibly—of the Government to a journalist. In other words, we have a series of hearsay statements which the Opposition are seeking to turn into a major scandal. They will fail.

Mr. Michael Fabricant: Further to that point of order, Mr. Deputy Speaker. The hon. Gentleman may be unaware that the Financial Times states:
A senior member of the government said".
It was not an official. As you will know, Mr. Deputy Speaker,
A senior member of the government
is the code for the Chancellor himself.

Mr. Deputy Speaker: This is not an matter that can be debated at this moment. There is a subject for debate before the House at present. I do not believe that it is for the Chair to rule as to whether subsequent action is taken. Any decision which might or might not be justified for the purposes of investigation by a Select Committee or any other means would not be determined by the Chair.
Obviously, there will be other opportunities for such a matter to be raised if it is justified, but I can see no point in these proceedings continuing further at this time. We must move on to the debate.

Exchange Rate

Mr. Austin Mitchell: I was delighted to see the full attendance by Opposition Members for the debate; I thought that, after 20 years of maintaining an overvalued exchange rate, they had actually come along en masse to testify to their conversion to a belief in competitive exchange rates. Now that they are leaving the Chamber because they cannot face hearing the catalogue of their failures, I am a little disappointed, especially because this is an extremely important subject—potentially more important than this afternoon's Budget statement in its effects on the British economy. I am delighted, therefore, to have the opportunity to draw attention to it in this debate.
We are facing an unprecedented increase in the pound sterling exchange rate—in other words, in the competitive price of our exports on export markets—which has taken us back to the levels that we were at when we were in the exchange rate mechanism. The pound is now at a five-year high. That is the prelude, in my view—in my fears—to an industrial blood letting of the type that the two previous highs, in the early 1980s and the early 1990s, produced in British manufacturing.
The exchange rate has the potential to undermine anything that the Chancellor does. Unless British industry has the prospect of competitiveness—in other words, of generating profits—we shall not get the investment that we want in our economy. Unless there is a prospect of demand for industry's product, we cannot generate new jobs and put people back to work.
The exchange rate rise threatens both profitability—and therefore investment—and employment. The facts are stark. In the year to April 1997, the pound rose by 17 per cent. against the ecu, by 22 per cent. against the deutschmark, by 7.6 per cent. against the dollar—which is rising itself—and by 26 per cent. against the yen. Those are the currencies of our competitors.
This morning, The Guardian says that the pound is 26 per cent. higher against the deutschmark and the franc than it was last August. Those are horrifying figures. That direct loss of competitiveness comes at the end of a long period in which the pound has been overvalued. Indeed, it is a long period in which our relative export unit cost—the measure of our prices against those of our competitors for manufactured goods—has risen.
John Mills has calculated for me that, from 1973 to 1997, the loss of competitiveness on relative export unit costs was between 40 and 50 per cent. It is difficult to have a more precise calculation because the bases keep changing but an increase of 40 to 50 per cent. in the price of our manufactured exports is disastrous for competitiveness. What would happen to Sainsbury if it faced such price rises on its shelves when Asda or Tesco did not? Sainsbury would quickly close, which is the effect of that sustained rise on the British economy.
What can British industry do? Although it can cut costs, fire workers or stop research and development and other measures that contribute to its long-term survival, it can do none of those on a scale adequate to compensate for the increase in its prices which the exchange rate has forced on it against its will and its judgment—a force outside its control. That rise in prices threatens it with disaster.
People tell me that exports are doing well. So what? Firms continue to export without profit just to retain their share of the market because they know that once they are out of the market, they cannot get back in. That has been the history of British failure for 20 years, so companies naturally try to keep their exports going without a profit by holding their prices against the rise in the currency. That, however, is a finite process—it cannot continue for a sustained period. People said that trees had survived the drought, only to find that they suddenly collapsed because they had been rotting from the inside.
The main threat from the rise in the exchange rate is to manufacturing, because that is our front line. Manufacturing generates 60 per cent. of our exports. It is an extremely competitive market, which is becoming ever tougher and more competitive as the industrial power of the young dragons of the far east grows. Price is crucial in manufacturing exports because they must be sold at a price that generates a profit sufficient for companies to invest, stay in the game and expand. Unless their exports grow, they are dead in today's competitive world. And unless we can sell exports at a price that allows all that, manufacturing companies' long-term prospects are disastrous. They must run at full capacity and use that capacity to keep down their unit costs. As exports suffer, capacity usage declines and unit costs rise.
All that does not happen immediately, but early warnings are already appearing in company reports. I have been poring over company reports, profitability forecasts and warnings issued by companies, which show that companies are cutting investment, transferring production overseas and slimming down their work force. Profitability is now falling rapidly in crucial sectors, such as building materials; textiles; food manufacturing, which is a problem for Grimsby; pharmaceuticals; the tourism and leisure industry; and in oil.
British Steel has supplied a briefing to Members of Parliament warning of the consequences in dire terms for British Steel and all the firms who use its products if the exchange rate rise continues. It says:
Britain's loss of competitiveness will also damage the UK's attractiveness to inward investment.
Sterling's overvaluation will have an increasingly negative effect on UK manufacturing industry exports.
The surge in sterling's value against the German DM (and other ERM currencies) is already adversely affecting the competitiveness of the UK economy.
ICI has issued warnings along the same lines and is sensibly transferring production overseas. Stirling Tubes in Walsall, Pilkington, the British Tourist Authority, Vero and Halma—new technology companies have fantastic names—have all issued warnings. I notice that they are all quicker to warn of the adverse consequences under a Labour Government. Under a Tory Government, they might have kept quiet for longer. I hope that the Government will respond to the warnings, but those companies are certainly quicker to cry pain under Labour whereas under the Tories they tended to grit their teeth and suffer. They do not do that now because they know what the consequences will be, and those will inevitably occur after a time lag. First, there will be cuts in research and development and in what is necessary to keep up with the field; secondly, investment and in everything necessary for survival will be cut; thirdly, jobs will then be cut and unit costs will go up. Eventually, the firm will go under.
The tragedy is that we have seen it all before. Each time, we have had the same comfortable reassurances that we are getting now. We are assured that we can weather the problem and that British industry is competitive, lean and mean because it is dynamic. That is rubbish. The consequences for British manufacturing are the same now as they were in the two previous bouts of overvaluation. It is simply a truism to say that British industry is competitive at this exchange rate. By definition, any firm that still exports is competitive at this exchange rate. The problem is whether it generates sufficient profit to continue. In reality, it does not. Companies cannot learn to live with such a high exchange rate; they can simply learn to die with it.
The laws of economics and of elasticity and demand will not be suspended for new Labour, just as they were not suspended for the Tories. Exactly the same will happen now. The symptoms, the overvaluation and the warnings are the same as in 1979–82, when the Thatcher Government generated a massive overvaluation, and in 1989–92, when we belonged to the exchange rate mechanism. The collapse of the ERM afforded us some relief and made us competitive again—without disastrous inflationary consequences.
People say that if the pound comes down, we shall face inflation. That was disproved by the ERM experience. The same will now happen with consequences for manufacturing and for our balance of payments. The reverse J-curve effect occurs here. Just as with a devaluation, things get worse before they get better as the J-curve effect makes the balance of payments adverse initially before improving it enormously. With an overvaluation, therefore, it is the other way round and the reverse J-curve effect makes the balance of payments better before making it worse long term. Those balance of payments consequences will occur next year, when the balance of payments deficit will rise. The public sector deficit will also rise because workers will have been fired and will pay less taxes, and expenditure on benefits will also rise. Moreover, the public sector borrowing requirement will rise as a consequence of the decline in manufacturing.
We must tackle the central question: "Why is that happening?" This country has always been predisposed to an overvalued exchange rate because in our economy finance is strong while manufacturing is comparatively weak. The manufacturing industry is less listened to by the Government and has less influence on the counsels of the nation than the finance industry, which sits at the centre of our economy with its glorious City dinners attended by Chancellors and thinks that it speaks for the nation. Its interests lie in high interest rates—that is what the finance industry lives by. The interests of finance are in an overvalued exchange rate, because that allows it to acquire assets and to manipulate money around the world. Those are not the interests of manufacturing. Finance has always been too strong and too much heeded in our economy.

Mr. Bill O'Brien: On my hon. Friend's point about causes, will he comment on the fact that £30 billion is being injected into the economy by building

societies acquiring plc status and paying people bonuses with their own money? Does my colleague think that that has a bearing on the heating of the economy?

Mr. Mitchell: My hon. Friend is right. I shall deal with that later. It is ludicrous that £30 billion of purchasing power is allowed into the economy. Even if people do not spend the money that they get from the shares, they still feel more confident. They feel that they have more money, so they spend more. That will produce a rise in interest rates. The Bank will warn of inflation, demand, and the threat of overheating, interest rates will go up and the consequence of that will fall on manufacturing—on the jobs of the people who are spending the money. It is one of the stupidities of our economic policy that that goes on. I agree with my hon. Friend.
The last two overvaluations were the prelude—or the consequence, because they occurred under the Tory Government—of wilful stupidity. That still exists because the Bank still influences our economic policy, but the stupidity was mainly that of the Government. In the first great Thatcher deflation, which was associated with enormous overvaluation, which in turn was the instrument of that deflation, the psychology was that British industry is like an English public school boy—it must be made vigorous, healthy, good and virtuous by exposure to punishment in the form of cold showers and frequent beatings. Manufacturing was subjected to such treatment, and 1.8 million jobs were lost as a consequence of that overvaluation.
The second overvaluation was caused by the Government's infatuation with the exchange rate mechanism. That lost us almost a million jobs in manufacturing, and about 1.5 million jobs altogether.
Now there is a little less wilful stupidity. The Government have changed, but we face the EMU mess. It cannot be described as anything else, much as my hon. Friend the Member for Rotherham (Mr. MacShane) would like to rush in and support it. There is uncertainty about whether ERM will go ahead, which is causing instability in the markets. The growing fear is that there will be a soft euro, which is bringing more money to the United Kingdom to push up our exchange rate.
Europe's problems are causing problems for us because they have the effect of raising our exchange rate. That will continue, because Europe will not clear up the mess quickly. It is staggering to see how elites are trying to force down the throats of electorates a monetary union that they do not want and whose consequences they know will be severe for them.
We will get no relief from Europe, which will go on causing us problems. The second cause of our problems is the fact that our interest rates are high—astonishingly high in real terms. I have a table from the Treasury. I believe that parts of it are wrong, but the Treasury figures show that real interest rates in 1996, adjusted for inflation, were 2 per cent. They are, of course, higher now because interest rates have gone up. In the 1970s, they were 0.75 per cent. or 0.5 per cent.—that was in 1977, for example. In some years, we had negative real interest rates. Now they are at a record high level.
The result is that money is coming to this country. The Swiss exchange rate is rising, but the Swiss are not paying interest on the money coming into Switzerland. We are paying generous interest rates, which attract more money to Britain.
Like a self-trussed turkey voting for Christmas, we have delivered ourselves to markets, by the decision to hand interest rates over to the Bank of England and, having given up the monetary weapon, by our commitment not to use the fiscal weapon by increasing tax rates. That is perfectly acceptable to markets, confidence grows and people come in to invest in sterling and push our exchange rates up.
It was curious to give control of interest rates to the Bank of England at any time, but it was daft when interest rates have such an effect on the exchange rate by which we live and on the basis of which our exports succeed or fail in world markets; and it was crazy to do so at a time when the pound was going up anyway. That concession of interest rates pushed them up further because the Bank's thinking is, "When in doubt, raise interest rates." Its highest wisdom is to put up interest rates. It always thinks that the economy is overheating. Any glimmer of growth, and the Bank of England is howling that the economy is overheating. Three per cent. growth is pathetic by any standard for rebuilding our manufacturing base and generating jobs and well-being for the people, but the Bank is panicking. The financial committee warns of overheating and says that it is terrible.
The Bank always thinks of manufacturing industry as greedy workers and greedy shop stewards demanding more money if the economy expands. The real pressures for inflation come from the financial community and the City—as my hon. Friend the Member for Normanton (Mr. O'Brien) said, by pumping out money from demutualisation, which is in its interest—and from high pay in the City and lax credit. Most of the economic revival in the UK is due to an increase in the money supply produced by credit being poured out by the financial institutions.
The Bank blames manufacturing and, instead of dealing with the causes—the financial community itself and its methods of operation—it clobbers manufacturing with high interest rates and an overvalued exchange rate to make it suffer for the sins of others. That is a marvellous way of running an economy, but it is disastrous for any country whose economic base, like ours, is not wide enough and needs to be expanded. The asset inflation generated by finance, and not wages, is the only true cause of the current inflation.
The Bank of England is fighting inflation long after it is dead. That is necrophilia. Inflation is no longer a threat. It is in a glass case somewhere in south-east Asia. The enhanced competition of those economies, plus the breaking of wage inflation and the power of labour in the UK, which has been a tragedy in many respects, means that inflation is dead, yet the Bank of England is still clobbering manufacturing industry, which it sees as the cause of inflation. That is crazy economics.

Mr. Denis MacShane: Can my hon. Friend guide us by explaining why our inflation rate is none the less still significantly higher than that of the United States and most of our European partners, including those growing more strongly than we are? If wage-led inflation is dead, why is the anger over fat-cat pay feeding down into the labour market? We are seeing serious claims for 5, 6, 7 and 8 per cent. pay rises this year in many sectors.

Mr. Mitchell: I hope that my hon. Friend does not identify with the Clobber the workers theory of

economics, which the Bank of England propagates. I hope that he will say something about information such as that published by British Steel, which affects his constituency vitally.
Our difference in inflation is marginal. The experience of the past few years both in the United States and the United Kingdom is that a fall in the exchange rate does not generate the inflationary consequences that were widely feared. For practical purposes, inflation is dead. To put it at the centre of economic policy, when the real problem is insufficient jobs, insufficient growth and a weak industrial base, is to live in the past and to fail. Whenever we get an expansion in the UK, we kill it.

Mr. Dale Campbell-Savours: I have been following my hon. Friend's logic closely and I agree with much of it, although not with his general position on these matters. If he argues that interest rates are at the core of high exchange rates, what does he suggest is the best way to manipulate interest rates down? Can he give us his agenda?

Mr. Mitchell: I am grateful that my hon. Friend is following my argument—with enthusiasm and joy, I hope, as it affects his part of the world as well as mine. I shall deal with the matter shortly. I did not say that interest rates were the only cause of high exchange rates. I said that turmoil in Europe was one of the major causes, as well as the strength of finance and the prevailing orthodoxy in economic management, which is attractive to speculators in this country. All those are part of the equation and must be taken into account.
I was arguing that the first response was to clobber manufacturing, and that raising interest rates was one of the instruments by which that was done. However, we live by manufacturing. It provides most of world trade and is the basis for most of our trade deficit. Do we in Britain never learn? We are heading the same way as we were before two previous disastrous blood lettings, at a time when we need to widen our industrial base and develop new industries. Manufacturing has been through 20 years of slimming down and overvaluation and it is suffering from anorexia instead of having a lean, mean, "Let's get at the markets" mentality. The position will be made worse by the battle against inflation that dominated the late 1970s and the 1980s. Overvaluation as a means of fighting inflation will have the same consequences now as it did then.
I do not want those consequences to occur under a Labour Government. If we are not going to redistribute wealth and increase taxes—and it is right not to increase taxes—we can generate the extra public spending that we need only through economic growth achieved through getting people back into work. How can we achieve that when overvaluation is leading us into the economic trap that I have just described? We cannot narrow the tax base any more by such blood letting without disastrous consequences for Labour's programme as well as for borrowing and without producing exactly the circumstances that lead inevitably to more cuts and more deflation in the public sector. People will then say that the public sector is too big to be supported by the shrinking industrial base.
We are following the economics of folly. The Government cannot afford to be locked into a downward spiral with a shrinking industrial base and more


unemployment justifying more cuts in the public sector. We must expand our industrial base by remedying its two basic problems. First, we must remedy the deficiency of demand for what the British economy can produce at full capacity. Secondly, we must offer the prospect of profitability. British manufacturing is just not profitable enough. We have to make it more profitable by generating demand. We should reduce the exchange rate and let the economy move into export-let growth.
Supply-side measures will not produce those improvements. I am all in favour of supply-side measures such as upgrading skills and training, but supply does not generate its own demand. Governments generate demand, not supply. We need extra demand and a sustained prospect of competitiveness.
A lot of rubbish is talked about economic and monetary union. It has been said that unless we commit ourselves to monetary union, inward investment will no longer come to Britain. There are fears that we will be excluded from Europe. That is total nonsense. Foreign investors want not stability, but a competitive base from which to export. We can provide them with that only if we have a competitive exchange rate on a long-term basis. That would guarantee that if companies set up here they would be able to produce and export profitably in Britain and sell at a profit internally and overseas.
We already have problems because we do not have a competitive exchange rate and we have to offer foreign investors bribes to come here. For example, Nissan was offered £28 million more regional development money in Sunderland than we could offer in Humberside. So Nissan went to Sunderland. The same applies to Toyota, Jaguar, to Ford—to develop a new model and a new engine—and to BMW. All those companies were bribed with taxpayers' money to come to Britain or to stay here because the exchange rate was not sufficiently competitive to lure or to keep them here. As a result of our obsession with an overvalued exchange rate, the taxpayer has to pay out more to keep firms here and to keep Britain attractive to inward investment.
We should also bear in mind the fact that much of our so-called inward investment involves the retained profits of overseas firms that have already invested here. In terms of attracting new overseas investment, France has a better record than we do. Retained profits represent a large component of inward investment into Britain. However, those retained profits will not remain here if exchange rates remain high. The money will be invested overseas. That is what Imperial Chemical Industries and other big British firms are doing. Ford is sourcing more from Europe. Those are the symptoms of extended overvaluation and if it continues, Britain will no longer be attractive to inward investment. We will not be sufficiently competitive to justify foreign investors coming here rather than somewhere else.
The message is clear. The prospect of sustained overvaluation may be one reason why Toyota has been hesitating about making a second investment into Britain. We have the pound down and make the exchange rate competitive to allow exports to fall in price or to generate more profit for investment in Britain and to use the existing capacity to make imports dear.
We should use the price mechanism, which is now our only weapon for changing our competitive position, to reduce our labour costs through a cheaper exchange rate. It will be claimed that raw material prices will also rise and, of course, they will, but our role is surely to add more value to our imports and to export them at a higher price. That higher price is set by a competitive exchange rate.
If the elasticity of demand for imports and exports together is more than 1, we get direct and immediate benefits from a more competitive exchange rate—from devaluation. The elasticity of demand for British imports and exports is somewhat lower than that of our competitors. In Britain the figure is 1.51, in Japan it is 2.35 and in Germany it is 1.81. It is above the crucial balance figure of 1.
Devaluation will work. Indeed, it is the only way to expand our exports and to stop the continuing and remorseless fall in Britain's share of world trade. That is still going on and we have to turn it round. So how do we do it? I hope and believe that it is not beyond the wit of the Government to address a major problem. It has to be tackled. We might say that it is not as bad as people think, but those words would be spoken in the wind in six months' or a year's time when the consequences come through. We have to act now whatever comforting words are said.
We must move towards long-term competitiveness. Why does not my right hon. Friend the Chancellor use his mouth as a weapon and talk down the exchange rate? If he is committed to long-term competitiveness and announces that commitment, there will be an effect on the exchange rate.

Mr. Campbell-Savours: Is not the inevitable consequence of my hon. Friend's arguments that in the end he will become a passionate supporter of the single currency as we could well have the opportunity of locking ourselves in at a sensible rate? In that case, speeches such as that by my hon. Friend would be unnecessary in future.

Mr. Mitchell: I should have expected that. Fortunately, I have five pages of rejoinders to my hon. Friend as I knew he would be here this morning. However, the simple answer to him is spherical objects. There is no possibility that we will be able to lock ourselves into the single currency at a competitive exchange rate. We shall have to lock in at the market rate and, if it is the current market rate, it will be as disastrous as it was last time. My hon. Friend and I both know that.
In any case, my hon. Friend is trying to raise a divisive red herring in the Labour party. He knows that we are not going in in the first round and the decision will not be taken until after the next general election, so why is he trying to stir trouble in an ideological fashion in the middle of my speech? My hon. Friend is trying to hold me up as I approach the conclusion of my speech.

Mr. Andrew Love: My hon. Friend has said that today's debate is about the consequences of a high exchange rate, although he has spoken about the means of reducing it. We should be debating the means today. My hon. Friend referred to market rates, conditions of deregulation and markets. How would he propose to manage the exchange rate down to a level that he would consider to be competitive?

Mr. Mitchell: I am grateful to my hon. Friend for taking me back to the main thread of my speech—and, indeed, bringing me to a conclusion.
First, we have to use the influence of my right hon. Friend the Chancellor's opinion and announce that our rates are uncompetitive and that the Government's objective is long-term competitiveness through the exchange rate. If my right hon. Friend says that, it will shift the perspective of the markets and bring down the exchange rate.
Secondly, it is silly to be dumping huge quantities of money on the market through demutualisations—some 30 billion quid, with another £16 million to come from further demutualisations. There should be a moratorium on demutualisation.
Thirdly, we must get interest rates down. The Bank of England must be made aware of the problems it is causing. It appears to be wholly unconcerned about the exchange rate. Perhaps it is because it does not suffer the consequences—indeed, the financial community reaps the benefit through an ability to invest overseas and to manipulate money around the world. It is manufacturing that suffers the consequences.
I would like my right hon. Friend the Chancellor to take everything back under his control. A Chancellor must have power over both monetary policy and fiscal policy. He cannot run the economy without both weapons—he needs a two-gun holster. If my right hon. Friend does not take back control—and as we have not yet passed legislation, he could still intervene in these matters—the Bank of England must be pressured and persuaded to reduce interest rates.
We also need to control credit. Why not require deposits with the Bank of England, varied and charged interest or not, according to the lending policy of the institution making the deposit? We should control credit in the economy. It is silly to allow people to pour credit on to the market—it is the money supply that is causing the consumer boom and making everybody panic. If we do not control credit, the Chancellor's only recourse is a lax economic policy. He could not fund the debt. He could get ways and means advances from the Bank of England and not pay interest on them, but that would be viewed as irresponsible economics. It would be a blow to confidence. However, that is the only alternative to effective control of credit and a policy of lower interest rates, which would bring down the pound with a sure and certain touch. The alternative is a long anorexia and another industrial winddown, which we cannot afford.
The real devaluation necessary, based on the competitiveness figures, is in the region of 35 per cent.—shock, horror. In fact, the American dollar has gone down 40 per cent. since the over-valuation of the mid-1980s, without any disastrous consequences. Indeed, there has been a direct benefit to American manufacturing and the American economy. I am not saying that we should devalue by 35 per cent. at once; we should work to get the pound down over a long period. We should make that a central objective of policy so that the markets will know what we are doing and react accordingly.
We cannot treat the pound like a phallic symbol, so that the whole country—and especially the media—are proud when it is hard and filled with post-imperial tristesse as soon as it softens. That is not what the pound is about—it is a market-clearing mechanism and it has to float. It has suffered from 20 years of over-valuation. We need 20 years of competitiveness to get back into the manufacturing game and for Labour to achieve its

policies. Therefore, we should simply announce that the pound is over-valued and that Labour believes in a competitive exchange rate. What is a competitive exchange rate? It is the rate at which we can balance our trade in conditions of stable growth and full employment.

Mr. Nicholas Winterton: I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) not only on obtaining this Adjournment debate, but on his choice of subject. He knows that I agree with a great deal of what he said. By saying that, I am not sure whether I am doing his reputation and prospects any harm or putting the kibosh on my own.
I declare my interest as I am the chairman of the Manufacturing and Construction Industries Alliance, which was launched within the Palace of Westminster—with the support of all political parties—to move the interests of construction and manufacturing up the public, political and parliamentary agenda.
I am glad to take this opportunity today to support the hon. Gentleman in his arguments, although I intend to concentrate primarily on the subject of interest rates, which have a dramatic influence on exchange rates, which in turn are damaging British manufacturing.
I shall begin with construction because it is a barometer of the overall success of our economy and it generates such demand in its own right—demand for building materials, fixtures, fittings, carpets, curtains, steel, brick, concrete, cement, furniture, electrical goods and decorating materials. It is a driving force for many parts of industry, including retail and, of course, manufacturing industry.
I am sure that I shall take all hon. Members with me when I say that the manufacturing sector is important because it is the only non-inflationary source of sustainable economic growth in this country or in any other. That is why, when I saw that manufacturing industry was part of the debate, I immediately took an interest. I am delighted to be making a contribution.
As the hon. Gentleman said, we are a trading nation. Despite the importance of the service sector and invisible trade—especially in the financial sector—we need to export manufactured goods to survive and to have a stable, progressive, successful economy. From the hon. Gentleman's argument and philosophy, I am convinced that that is also his objective. That is why I strongly support what he said.
The two important sectors of manufacturing and construction are linked not only by their comparative importance, but by the way that they have borne the brunt of the recent economic recession. The hon. Gentleman described what has happened as blood letting. Those two sectors have been seriously and adversely affected by the blunt way in which successive Governments, Conservative and Labour—and, indeed, the Governor of the Bank of England—have used interest rates as the sole panacea for all economic problems.
It is obvious to anyone who has been involved in industry, especially those who need to export their products, that high interest rates raise the level of exchange rates. If the level of exchange rates is raised, Britain will become less competitive. The current high level of interest rates has forced up the value of sterling


and brought about the debate this morning. That high level has created an almost insurmountable barrier to many of our exporters. It has placed a dampening hand on the first emerging breaths of confidence in the construction sector, whether it be business and commercial construction or domestic construction.
To take up the hon. Gentleman's remarks—and I entirely endorse his position—the use of interest rates is too blunt. It is too insensitive a tool to be deployed responsibly to manage our sophisticated economy. It is far too powerful a tool to have been passed into the largely unaccountable and undemocratically answerable hands of the Governor of the Bank of England, whose ideological purism and dogma-driven lust will lead him to maintain rates at higher levels than can be justified. It will leave us in an uncompetitive position compared with other countries in Europe and in other parts of the world.
The hon. Member for Great Grimsby referred at some length to the European Union, and some interventions related to Europe. The majority of our trade is done outside the European Union. [Interruption.] Indeed, it is. The Confederation of British Industry and others put out a lot of misleading statistics, but I assure the hon. Member for Rotherham (Mr. MacShane), who is shaking his head, that the majority of our trade is done outside the European Union, so what goes on there is of only partial interest to us.
We have a robust and healthy economy. I say that as an opposition Member: like many of my hon. Friends, I have been in the Opposition before, although for the past 18 years I have, from time to time, sat somewhat uncomfortably on the Government Benches. Our healthy and robust economy is due, at least in part, to the policies of the previous Conservative Government. It is a fact that the ogre of inflation, if not dead, is certainly firmly under control. Spiralling inflation, such as we saw under both Labour and Conservative Governments, was a product of historical, social, political and economic conditions, which no longer apply: that is, if we are to begin to believe even one word of what the new Government tell us about abandoning their bad old ways.
If the new Chancellor of the Exchequer is committed to prudent management of the economy—dare I say, following the prudent management of the Conservative Government—why must interest rates remain so unnaturally high? The hon. Member for Great Grimsby, in his interesting speech, said that interest rates in this country are abnormally and unnecessarily high. Why must British business face high interest charges when it seeks to borrow to invest in new plant and machinery and in the development of new products, which are vital if we are to remain competitive and forceful in international world markets? Why must the British service and commercial sectors face unnaturally high property prices? Why must home owners, whose support new Labour is pledged to nurture, face unnaturally high mortgage costs? We may hear some further unfortunate and bad news this afternoon.
Handing the control of interest rates to Eddie George at the Bank of England was an irresponsible and reckless folly, for which our economy may yet pay an extremely high price. The House should be able to debate that policy in considerably more detail in the near future.
High interest rates and their inevitable impact on exchange rates impose burdens, without which companies would be able to compete more effectively and become more profitable, and thus pay more taxes. The Government receive more in tax from business when there is a rise in economic growth. Without those burdens, more jobs would be created and the burdens on our social security system would be reduced. The Government would benefit, because they would get people back to work, which is one of their major objectives, for which I commend them. Putting people back in work, particularly when they are currently unemployed, would reduce the substantial social security benefit bill.
I want to send a clear message to the Chancellor of the Exchequer, who will deliver his first Budget later today. We would all be better off if he reduced interest rates, if not today, at least in the near future, because that would have an immediate impact on exchange rates.
It is a tragedy that the British economy might be hit by a double whammy: the higher interest rates that we are already experiencing and, sadly, the higher taxes that are imminent. The hon. Gentleman's message was clear. We should give our economy the boost of energy that it needs to maintain its current progress in the right direction. To bring that about, we require a reduction in interest rates, not an increase.
I expect that the comments I am about to make will fall on fertile ground among some Labour Members. We should review capital gains tax, so that unquoted companies are not unfairly penalised. We should review capital allowances, so that businesses are positively encouraged to invest: they could be targeted or capped if necessary. We should invest so that we remain competitive and are able to export, create jobs and generate extra growth in our economy. To that end, fiscal incentives are good.
I shall now say something that will perhaps not fall on such fertile ground. I believe that we should abolish inheritance tax to secure the future of many family firms. It is in family firms that real growth in industry and commerce takes place and where the majority of jobs are created. In many instances, inheritance tax is a disincentive.
We need to hit the housing market like we need a hole in the head. Housing, construction and manufacturing are a driving dynamo of our economy, and we should encourage those sectors. Mr. Eddie George regularly talks of still higher interest rates. Unacceptably high interest rates, reductions in mortgage interest relief at source, which is a small but valued help to families buying their own homes, increases in stamp duty, which is an anomalous tax that I believe should be abolished, and the possible ending of the capital gains exemption for the family home would be retrograde steps and could turn our economy from its positive, encouraging, upward course and put it into a state of stagnation and depression.
We should look to the long term and aim for low interest rates and low exchange rates. That would enable the people and businesses of this country to create genuine wealth, and to contribute meaningfully to the future of our economy and the creation of jobs.

Mr. Denis MacShane: I am grateful to my hon. Friend the Member for Great Grimsby (Mr. Mitchell) for initiating this debate. We have heard


two remarkable speeches. The contribution of the hon. Member for Macclesfield (Mr. Winterton) contained radical thinking about the importance of manufacturing. His Front-Bench colleagues should listen to him, but, alas, I fear that his remarks will fall on stony ground, because in the past 18 years there has been one long assault on manufacturing.
My hon. Friend knows that in the pantheon of socialist history, thinking has always been a left-wing deviation. I congratulate him on a speech full of ideas and thoughts, some of which were deviant. If I allow an occasional thought to slip into my speech, I hope that my hon. Friends on the Front Bench will take no notice, and will excuse my foray into the world of ideas.
Some contradictions have to be faced. If the high exchange rate is so bad for employment, why is unemployment falling as the pound is rising? If high interest rates are so damaging for British manufacturing exports, why did the high interest rates and the high pound of the early 1980s coincide? The Library has published an excellent document on economic indicators dated 1 July 1997, which shows that the last time that we had a trade surplus in manufactures was in the early 1980s, at the time of high interest rates and a high exchange rate. The situation is complex. I hate that dreadful cliché "multi-faceted", but there are many unintended consequences and the matter is difficult to get right.
I want to make a case in support of my hon. Friend the Member for Great Grimsby for a lower pound, but I want to make a stronger case for a stable pound. We have suffered, not just in the past 18 years, but in the past 30 years, from the incredible yo-yo pound sterling, going up and down. The graph in the excellent document from the Library resembles a map of the deep ocean. It has more peaks and troughs than the Swiss alps. We should aim at a lower and stable rate. I do not regard the exchange rate as a market-clearing mechanism, as my hon. Friend seemed to suggest, which we should leave bouncing happily up and down like one of those ping-pong balls on a column of water at a fun fair.
We have a specific problem in manufacturing. I have a constituency interest, in that British Steel is the major employer in my constituency. It has taken a 50 per cent. hit on profits. Last year, it had profits of £1.1 billion for investment, pay, jobs and dividends; this year, its profits are less than £500 million. A great British success story such as British Steel cannot be asked to plan for the future, to pay fairly, to treat its shareholders well and to invest here and abroad if, from one year to the next, it takes a 50 per cent. hit on its profits. That has happened because British Steel, like many engineering manufacturers, has its products posted in deutschmarks for export to Europe.
Every engineering firm in my constituency is taking that hit on profits and employment. I warn my hon. Friends on the Front Bench with all seriousness that employment in the UK may have peaked. I fear that there will be a time lag before the immense hit that all our manufacturing sectors are taking starts to feed through into workers being laid off.
Not only manufacturing is affected. Many service companies are affected. The boss of a distinguished architectural company not unconnected with the millennium dome reported to me recently that he had had to lay off staff because he was losing orders overseas.
British tourism will take an immense hit, as will British Airways. It has become much more expensive to come to Britain compared with last year. It is fine for those such as the shadow Chancellor, who has a nice house in Normandy. He will have a lot more to spend on it this summer. But the high pound is damaging the promotion of British tourism and services.
That is true even in the micro economy—the world of conferences. Britain has become a key conference centre for Europe. In the past two or three years, orders for conference packages of interpretation, hotels and so on increased, but we are now losing orders to French or German companies, which can offer products in deutschmarks or French francs that undercut what we can offer posted in English pounds.
So I say to my hon. Friends and to the hon. Member for Macclesfield (Mr. Winterton), who is a doughty champion of manufacturing, that the service industry has also been badly hit by the exchange rate. The creative economy—the film and video economy in which Britain is a world leader—has also taken an immense hit.
I should love to enter into a long debate with my hon. Friend the Member for Great Grimsby about what we can do, but perhaps we should leave that for some other occasion. I want to put forward four simple ideas. First, the Treasury should drop its sublime arrogance. When the pound was high before the ERM debacle, it was the best thing that could have happened to Britain. Remember that? Two years ago, the pound slumped and that was the best thing that could have happened to Britain. Now, the pound is up at DM2.80, and that is the best thing that could happen to Britain.
The Treasury has the memory cells of a mite. It must humble itself and learn from other countries, perhaps from the United States, where for 10 years the dollar has been traded at a highly competitive rate, reflecting a rise in US exports. What lessons can we learn from the United States? Perhaps we can learn from the Netherlands, where unemployment is lower, interest rates are lower and the trading sector is stronger than in the UK. We might learn from Switzerland where, thanks to monetary measures, the value of the Swiss franc against the deutschmark has been reduced, not increased. There, not the invisible hand of the market but the visible hand of the policy makers has been applied.
Secondly—I am sorry to disagree with my hon. Friend the Member for Great Grimsby on this point—we have to maintain a low inflation policy. There are virtues in creating the independent Monetary Policy Committee for the Bank of England. I do not want our Chancellor, or in 20 years' time some Conservative Chancellor, waking up worrying about interest rates every morning of his life. The United States, which probably cleaves to many of the values about which my hon. Friend spoke, has an independent central bank. One could enter into the debate elsewhere. I should like the central bank to be advised by a committee with a more regional and manufacturing outlook, but we can discuss that later.
Thirdly, we must consider the unmentionable—labour market policy. The countries that have kept unemployment, inflation and interest rates low have an active labour market policy that does not allow wage demands to feed through into inflation. It is not clobbering workers; it is the essence of social democracy. Britain's adversarial labour market with one side up and one side


down has not worked. I advise my hon. Friend the Minister to turn her attention to labour market policy in order to keep a stable exchange rate.
Fiscal measures need to be used seriously, and I am looking forward this afternoon to innovative and imaginative fiscal measures in order to ensure that there are no further increases in interest rates and no further need to increase the pound's strength.
Finally, we come to the question of Europe. We shall not debate that today. I should prefer the British pound to be stable in the—

Mr. Mitchell: In a graveyard.

Mr. MacShane: —in the euro, with the other economies that have a much higher percentage of their economic base located in manufacturing than we do, which requires stability. There is no lead on that at the moment. We are not in a graveyard; we are in a complete vacuum. The Confederation of British Industry has climbed back on to the fence, saying that the euro should be put off for two years, as if it will not happen—do not see the euro; do not hear the euro; pretend it does not exist. That debate will have to resume. In a year or two, when the underlying manufacturing strengths of a low inflation and low interest rate euro are compared with the problems of not cleaning up the mess that we inherited from the Tories, it will come back to haunt us.
Yes, there are policy measures. The pound can be discussed. I do not want to advise my hon. Friends on the Front Bench to talk it down, yet that has worked in other countries. We need a competitive and stable pound with which our investors can invest, our buyers can buy and our sellers can sell, knowing over a long period what its worth will be.

Mr. Edward Davey: I apologise to the hon. Member for Great Grimsby (Mr. Mitchell) for having missed the first half of his speech.

Mr. Mitchell: What was the rest like?

Mr. Davey: I undertake to read it in Hansard to ensure that I do not miss anything of importance. However, listening to the second half of your speech—I mean, his speech, Mr. Deputy Speaker—made me think that I had heard it before.
The hon. Gentleman came to my college when I was an economics undergraduate. In his speech there, he talked about the overvalued pound and the plight of the manufacturing sector and argued that we definitely needed a devaluation. That was 10 years ago—1987—when the deutschmark was at 3.5 to the pound. That is the hole in the hon. Gentleman's argument: he has been arguing for devaluation almost whatever exchange rate we have had. That would be a continued devaluation.

Mr. Mitchell: I apologise for interrupting the hon. Gentleman again, but that is not true. I have argued consistently for a competitive exchange rate, although

sometimes that would have been more competitive than at other times. That is not an argument for constant devaluation.

Mr. Davey: With due respect, it seems to me that that was exactly your argument. You talked about going for a competitive pound, but in 1987 you seemed to think that that was lower than—

Mr. Deputy Speaker (Mr. Michael Lord): Order.

Mr. Davey: Mr. Deputy Speaker—

Mr. Deputy Speaker: Order. When I am on my feet, hon. Members must sit. The word "you" is being used again. Can the hon. Gentleman try to remember the right form?

Mr. Davey: I apologise, Mr. Deputy Speaker.
In the speech that the hon. Member for Great Grimsby made to my undergraduate colleagues and me, he said that if we devalued, even from DM3.5 to the pound, we would get a competitive exchange rate. Now, however, he suggests that if we devalue from about DM2.7 we will get a competitive exchange rate. At what level does he believe a competitive exchange rate lies?
I believe that the hon. Gentleman's remedy is a recipe for inflation. He argues that we should slash interest rates and have a lower pound, which would surely stir up inflation. The worst aspect of his proposals is that they would damage manufacturing industry—the sector of the economy that he hopes to help—because the spiralling inflation that his policies would cause would produce short-termism in British industrial investment. Industry would need to consider financial factors all the time instead of the real aspects of its business.
The real issues that face people who run a business are the training of their staff and investment in research and development. If there is spiralling inflation because of ever devaluing exchange rates, they are reduced to financial jiggery-pokery instead of dealing with the real elements of their business success. That is why an independent central bank is a good idea, and a good policy for manufacturing industry. It would set a stable framework for our macro-economic policy and help the Government in their attempts to bear down on inflation over the long term. That would reduce short-termism in the British economy and such a reduction is the one thing that manufacturing industry really needs if it is to invest for the future.
The hon. Member for Great Grimsby seems to have a bizarre understanding of how the exchange markets set exchange rates. He thinks that the Chancellor of the Exchequer has a powerful voice and can suddenly talk down the pound at will. I am sure that past Chancellors would say, "If only." If only they could open their mouths and the exchange rate would go wherever they said.
The idea comes from cloud cuckoo land. There is no way in which the Chancellor could push the sterling exchange rate in any long-term direction just by opening his mouth. Serious macro-economic policies are needed to direct the level of the pound and I am afraid that the hon. Gentleman gave no indication of the policies with which he proposed to direct that level.
For example, the hon. Gentleman seemed to suggest that we should loosen monetary policy, while giving us no idea what he wanted to do with fiscal policy. That is where the tough questions for setting macro-economic policy lie. If he really wants to reduce the level of the pound he needs to propose a massive tightening of fiscal policy.
In simple terms, that means that we must ask the hon. Gentleman whether he proposes to slash public expenditure or to increase taxes massively. The logic of your argument means that you have to—I am sorry, Mr. Deputy Speaker, I mean the hon. Gentleman has to—answer that question. He failed to do so.
The hon. Gentleman also failed to tell the House what type of exchange rate regime he wanted—a flexible or a fixed regime. I am worried that he seems to have taken no account of the need for stability in our exchange rates. He proposed neither a fixed exchange rate system nor support for the single currency.
Having made those criticisms of the hon. Gentleman's speech—

Mr. Mitchell: A speech I made 10 years ago.

Mr. Davey: The criticisms are still pertinent today, because the hon. Gentleman's arguments have not changed.
None the less, I welcome the debate, because it gives the Minister a chance to state Government policy on exchange rates—or perhaps the Chancellor of the Exchequer will enlighten us on Government exchange rate policy this afternoon in his Budget statement. Until now, we have heard nothing.
The policy seems to be one of benign neglect and we have seen the currency appreciate with no comment by the Treasury. That policy is not sustainable in the long term. We need a clear signal of the Government's attitude to the pound sterling and of their future policy as Britain prepares to move towards the single currency. I hope that, in her reply, the Minister will state clearly the Government's policy on the exchange rate.

Mr. Tim Boswell: I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on initiating this interesting debate and all who have played a part in it. I also take the opportunity to welcome the Economic Secretary to the Treasury to her post, the ministerial counterpart of mine. I look forward to debating matters such as these many times with her.
First, I must say from the Opposition Benches, in case there is any doubt—although my hon. Friend the Member for Macclesfield (Mr. Winterton) will have left the House in no doubt—that there is as much sympathy for and interest in manufacturing industry on our side of the House as there is on the Government side. In my election address, directed to a constituency in which engineering is extremely important, I took the trouble to mention the subject, as well as information technology. It is of great importance to us all.
In terms of the analysis offered by the hon. Member for Great Grimsby, some parts of manufacturing industry are undoubtedly feeling the pinch. He cited British Steel as a clear example; I could add agriculture to the others

that have been given. As everyone will know, agriculture is an industry whose financial arrangements are somewhat distinctive, but the effect of green pound revaluations has much the same, although an indirect, effect.
I pause to make the point that things can vary over time. Certain industries may be able to bear a high exchange rate for a period, but it may cause difficulties in the longer term.
As for the Opposition's approach, first, there is no simple policy of targeting the exchange rate. There have been excursions into that idea in the past—I need not return to them now—but they met with little success.
Secondly, there must be a middle way between the danger of abandoning all approach to fiscal prudence—at times it seemed that that was the hon. Gentleman's argument—and the equal and opposite danger that may be described as neurotic over-caution in the conduct of fiscal and monetary policy.
Thirdly, whatever the exchange rate is at any one time, it can be no cop-out or substitute for the adoption of policies designed to support business success and competitiveness. In that context, I cannot understand why the Government wish to go ahead with the minimum wage or sign the social chapter.
The Government have been left a golden legacy by my right hon. and hon. Friends—a strong economy. It will take a long time for that to dissipate and be lost—but lost it can be, if the wrong policies are adopted. For reasons that have a lot to do with electoral credibility, the Economic Secretary and the Chancellor have invested a great deal of effort in emphasising fiscal prudence. That is fine and good, but the danger is that it may lead to excess zeal and end up damaging the real economy. That is the substance of the argument we heard in the speech from the hon. Member for Great Grimsby.
The cumulative impression being given by the Government suggests a tendency towards this excess zeal. First, we had the remitting of monetary and interest rate policy to the Bank. Now, there is all this talk of an alleged black hole in the finances, based on a changed set of highly pessimistic assumptions about the course of policy. We also have had some heavy briefing—I put it no higher—from the Chancellor about his readiness to put up taxes today. He would do well to remember the example of the first Labour Chancellor, Philip Snowden, and he would be ill-advised to adopt such reactionary policies. The big danger at the moment is that all this self-indulgent talk of retrenchment will build pressures that feed into the existing buoyancy of exchange rates and may create in due course an unwelcome hard landing for the British economy.

The Economic Secretary to the Treasury (Mrs. Helen Liddell): I congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing this debate, which takes place on a day when there is considerable interest in the performance of the economy. We have seen on two occasions this morning great posturing from the Opposition on matters unrelated to the substance of this debate, yet when it comes to matters of considerable substance the Opposition Benches are almost empty. An intriguing development is the use of these Adjournment debates to hold the Government to account in relation to policy and then not to leave sufficient time for the Government to explore the policy options.
We were, as always, treated to an engaging canter through macro-economic policy by my hon. Friend the Member for Great Grimsby, who referred to self-trussed turkeys and the pound as a phallic symbol. We heard from the hon. Member for Macclesfield (Mr. Winterton) about the dogma-driven lust of the Governor of the Bank of England. These were unusual phrases to be used in a debate on this subject.
Many interesting points have been raised; some I can agree with, but a considerable number I cannot. Not the least of those was the comment made by the hon. Member for Macclesfield that inflation is dead, a point made also by my hon. Friend the Member for Great Grimsby. For ordinary people, inflation is a significant element in how they control and plan their lives, and gaining control of inflation is of considerable significance.
The remark by the hon. Member for Kingston and Surbiton (Mr. Davey) that he had heard a number of the points made in this debate before was correct, as this debate on the nature of the exchange rate and its relationship with the overall performance of the economy has been going on for more than 20 years. With respect to my hon. Friend the Member for Great Grimsby—whom I admire greatly—there was a touch of deja vu in my mind in relation to some of his remarks on devaluation.
I take this opportunity to welcome the hon. Member for Daventry (Mr. Boswell) to his responsibilities. I look forward to engaging him in debate in the years ahead. The Government have inherited an economy that has repeatedly gone through periods of boom and bust, with too little long-term stability. Our record of economic stability is one of the worst in the G7 and, since 1979, the United Kingdom has experienced the two deepest and longest recessions since the war.
As my hon. Friend the Member for Great Grimsby pointed out, our inflation performance has been poor also. Over the last full international economic cycle, from 1982 to 1993, the UK's inflation rate was higher than any other G7 country apart from Italy. Short-term interest rates are higher than in most other major industrialised countries and long-term interest rates—as my hon. Friend pointed out—have been well above the average for the major G7 industrial economies. That record reveals the lack of credibility of the previous Government's ability to meet their inflation targets, and it is why my right hon. Friend the Chancellor has made clear that the commitment of this Government is to secure long-term stability and, from that, economic growth.
Changes have been made in monetary policy to enable the country to secure the basis of sound finances and the criteria for setting the level of inflation. We are taking politics out of the matter, so that businesses—manufacturing businesses in particular—are in a position to plan ahead to secure economic growth.
The Government share the anxieties about the exchange rate, but there are no short-term fixes—despite what my hon. Friend the Member for Great Grimsby suggested. There is a need for a stable and competitive exchange rate, consistent with the Government's objective of price stability. That is one of the main reasons why we are committed to creating an environment of macro-economic stability. Low inflation and sound public finances are necessary conditions for sustained exchange rate stability

and are sensible objectives in their own right for the management of the economy. Monetary policy has to be guided by the long-term needs of the economy and not just by short-term political considerations. In putting monetary policy into that long-term framework, we believe we are in a position to create the climate for growth and competitiveness.
The subject of this debate was not just exchange rates, but raising long-term growth and competitiveness. I disagreed with my hon. Friend the Member for Great Grimsby on the price mechanism, which he said was the only way to secure competitiveness. Securing competitiveness is much more complex than that and the Government have acted to put in place mechanisms to secure long-term competitiveness.
The appointment of my noble Friend Lord Simon as Minister for Trade and Competitiveness in Europe underlines the Government's commitment to taking forward growth and competitiveness. Lord Simon will play a leading role in completing the single market and will call for firm action to be taken against illegal state aid, which distorts the operation of markets and the criteria for long-term growth. He is also chairing the interdepartmental ministerial group on competitiveness and the single market, on which I serve as the representative of Her Majesty's Treasury. It will consider how to improve EU competitiveness as an effective means of improving the performance of United Kingdom firms in world markets, thus creating sustainable jobs and greater prosperity.
I accept what the hon. Member for Macclesfield said about improving export performance, particularly in relation to manufacturing, but we must not forget the other aspects of the economy which require good export performance. The Government are establishing a new export forum to revive the United Kingdom's export performance. One critical element in that is improving the skills and training of the work force, so that it becomes internationally competitive. That underpins many of the announcements made by my right hon. Friends in the two months since the Government were elected.
We are investigating ways to improve the advice and support available to small and medium-sized businesses that need to be brought much more into the export market—the background from which I come. I know only too well that it is important to provide the right economic conditions in which investors can make decisions with greater certainty to allow companies to plan for the future. The announcements made by the Government since our election underpin our commitment to invest in infrastructure, technology and people as the keys to future economic success. In addition to the economic criteria determined by monetary and fiscal policy, they are critical elements in ensuring this country's growth and competitiveness.
In the next few hours, we will hear from my right hon. Friend the Chancellor about his plans for the future of the economy. I think that I can say without in any way prejudging his comments that he is committed to ensuring that the British economy is put on a sound footing for the future so that we can achieve economic growth and competitiveness into the next century. That will enable all our people to benefit and will enable us and our industry to play a part in world markets.

M20 (Noise Reduction)

Sir John Stanley: On 12 December last year, I initiated an Adjournment debate about the problem of the ever-mounting noise on the M20 between junctions 3 and 5. I make no apology for returning to the subject six months later. I do so because we have a new Government, and whether they choose to follow or to change the policies adopted by their predecessor is a matter of profound importance to my constituents. The Minister will note that I have broadened the ambit of the debate to cover the area between junctions 2 and 5; I will explain why later.
No doubt the Minister will have familiarised herself with the background of the issues that I shall raise. As she will know, the M20 is the primary route through Kent to the continent, and, by virtue of its geographical position, the primary route from the whole of Britain to the continent. At junction 3, which is in my constituency, two branches of the national motorway system meet. The branch from the north, the M20, carries traffic from London, traffic through the Dartford tunnel and traffic from the north and east of London to the channel tunnel. The other branch, represented by the M26 spur of the M25, carries traffic from the south and west of the country to the continent.
It was inescapable that that section of the motorway would be densely used, especially after the opening of the channel tunnel. Those living along the section of the M20 between Wrotham and Aylesford—following the boundary changes, Aylesford is now in the constituency of the hon. Member for Chatham and Aylesford—are suffering from the noise and environmental disruption.
Inevitably, the initial projections of the volume of traffic that would be carried on that section of the M20 were substantial underestimates. The section between junctions 3 and 5 was opened to traffic in December 1971, having been built with three lanes in each direction. Less than 20 years later, in 1989, the then Secretary of State for Transport, Mr. Paul Channon, announced in his White Paper "Roads for Prosperity" that the section would be widened to four lanes in each direction. That announcement set in train what I can only describe as probably the single most botched piece of motorway planning since the start of the motorway programme.
First, the announcement was made with no indication of how the widening would be carried out and what new land would or would not be required. As a result, the homes of 2,000 or 3,000 people living near that section of the motorway were blighted, which made them either unsaleable or saleable only at sacrificial prices.
Secondly, the Department of Transport had to spend some £30 million of taxpayers' money on the purchase of some 300 houses under statutory blight procedures. It transpired, however, that the purchase of virtually all those houses had been unnecessary, as the most desirable way of widening the section involved using the existing curtilage of the motorway, and no additional land would be required. Effectively, £30 million of taxpayers' money had gone down the drain. I made a formal complaint about the waste of money to the then Comptroller and Auditor General, who strongly criticised the Department of Transport's handling of the scheme.
The final instalment of this sorry saga came just seven and a half years after the original announcement of the widening scheme. In November last year, the then Secretary of State for Transport, my right hon. Friend the Member for North-West Hampshire (Sir G. Young), announced that the scheme was to be abandoned. Quite apart from the fact that further millions of pounds that had been spent on design, consultation and planning went down the drain, the announcement was another sad example of the extraordinary mishandling of the scheme.
For my constituents, the widening arrangements had had one potentially redeeming feature. Built into them was the adoption of substantial noise abatement measures, such as noise barriers and new earth contours. Under the last Government's policy, however, because the road had been opened after 17 October 1969, the abandoning of the widening scheme meant the automatic abandoning of all the noise mitigation measures. My constituents are living alongside the main road artery between Britain and the continent, and the Highways Agency forecasts that, even without any widening, traffic on the road will at least double over the next 20 years.
Let me put two specific policy issues to the Minister. The first relates to the Government's policy on noise barriers, and the second to road surfaces. The last Government's policy on noise barriers was set out by the then Minister for Railways and Roads, John Watts, when he replied to my debate on 12 December. He said:
the Department is required to provide noise mitigation in circumstance where we act as a developer by building a new road or substantially altering an existing one. We are not obliged to do so to deal with noise levels resulting from increased use of an existing unaltered road. I made it clear in answer to a parliamentary question earlier today that we have, in exceptional circumstances and where funds have been available, exercised a discretionary policy for providing noise barriers on roads last improved before 17 October 1969, but that policy is not applicable in respect of this section of road, which opened to traffic in 1971.—[Official Report, 12 December 1996; Vol. 287, c. 512.]
He went on to confirm that the cut-off date was not statutory but a matter of policy, which means that if the Minister is so minded she can change it without further legislation.
I tabled a parliamentary question to the Secretary of State to find out whether the present policy would continue or whether he would provide noise barriers on the M20 between junctions 3 and 5. The Minister replied:
It is not possible to justify the expenditure of public funds on providing noise barriers along this section of the M20, as this would mainly be of benefit to people who either bought property in the vicinity of the M20 in full knowledge of the noise from traffic, or were compensated for the loss of value of their property when the road was first built, in anticipation of the growth of traffic on it.—[Official Report, 25 June 1997; Vol. 296, c. 520.]
Will the Minister reconsider that policy, which appears to be—I hope that I am wrong—an endorsement of the previous Government's policy?
There is an extremely compelling case for reviewing the policy. The Minister's statement that the expenditure could not be justified is strange, in that only a few months previously, until November last year, the Department of Transport found no difficulty in justifying the use of public funds for the construction of noise barriers and other noise abatement measures along that section of the motorway. I accept that that was done in the context of the widening scheme, but I do not believe that the


Minister would argue that, merely because the widening scheme has been abandoned, there will be a considerable reduction in the noise disturbance.
The Highways Agency's figures show that, even without the widening scheme, the traffic on that section of the M20 will double. There is no evidence to suggest that there will be any material diminution of the volume of traffic using it, simply because the widening will not proceed. The cut-off date of 17 October 1969 for the discretionary policy of constructing barriers on existing roads looks increasingly anachronistic. Surely policy should be determined not by some past cut-off date, almost 30 years distant, but by the present environmental realities.
The present policy is based on the Department effectively disowning any environmental responsibility for what happens on existing roads. The Department is effectively saying that any intensification of existing use, creating increased noise and environmental disturbance, is not its responsibility and that it washes its hands of it. That position is not taken by those who operate airports in this country, and it would certainly not be allowed to be taken by companies in the private sector.
I recently had complaints about a company operating a sawmill in my constituency and I regularly get complaints about quarries. We do not allow private sector companies to say that, because they have planning consent, they can carry on intensifying use and creating more and more noise disturbance at ever-higher decibel levels for any number of hours in the day. We bring to bear on them the planning authority, public health legislation and the Health and Safety Executive. The Department cannot continue to operate a policy under which it simply walks away from the environmental consequences flowing from intensification of use of existing roads.
In the previous debate that I secured, I asked the then Minister for Railways and Roads, Mr. John Watts, whether he could consider whether the new road surfaces being tested by his Department could be applied to the section of the M20 about which I am concerned. I have deliberately extended the geographical ambit of this debate to cover the area from junctions 2 to 5, because on the section between junctions 2 and 3, heavy lorry traffic makes considerable noise as it goes past the village of Wrotham and up the steep gradient of the north downs to the top of Wrotham hill.
As recorded at column 514 on 12 December 1996, the then Minister replied relatively positively to my request for the motorway to be used for testing new road surfaces. When I tabled a question to the present Secretary of State asking him whether that section of the M20 could be used to test the quieter road surfaces being developed by the Department, the Minister replied:
When the M20 between junctions 3 and 5 needs attention as part of planned maintenance, the possibility of using it to test novel forms of quieter road surface developed by the industry will be considered."—[Official Report, 25 June 1997; Vol. 296, c. 520.]
Will the Minister extend her consideration of using the quieter road surfaces to junctions 2 to 5, for the reasons that I have explained? Will she, either in her reply or by letter, as the matter may require some research, give me the fullest possible information about when the Department plans to carry out resurfacing on that section

of the M20? Perhaps she may say more firmly than in her written answer that the Department intends to make every possible effort to use quieter surfaces.
The issue is deeply significant for my constituents and those of the hon. Member for Chatham and Aylesford. I strongly believe that it will not be sustainable for the Department simply to walk away from the environmental consequences of the intensification of use of existing motorways. I am told that the Department of Transport in the Netherlands has as a policy objective the planned resurfacing of main roads, specifically, to try to reduce noise disturbance, and that it applies that policy on existing roads. I earnestly hope that a similar policy objective will be adopted by the Department in this country.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): I congratulate the right hon. Member for Tonbridge and Malling (Sir J. Stanley) on securing this debate so early in the life of this Parliament. He has been a tireless advocate for his constituents in the matter and I welcome his raising it in the House, because it gives me the opportunity to explain more fully how the legislation dealing with the adverse effects of roads on the environment works.
There is no doubt that traffic noise is an exceedingly contentious issue, not least when defining what is a serious nuisance, because the perception of noise may vary from person to person and from place to place.
I recognise that people living near the M20 feel that they suffer the adverse effects of the traffic without receiving much benefit from the motorway. I must point out, however, that it plays a vital role in giving access to the single European market. The right hon. Gentleman detailed the precise importance of that stretch of our national road network; I believe that the effect of that access on our trade has benefited the nation. The efficient distribution of goods and other services brought about by that direct link to the continental motorway network has had a dramatic effect on society. Although we have had arguments to the contrary from the right hon. Gentleman, most of those effects have been essentially beneficial.
The right hon. Gentleman argued that the discretionary powers provided by the Highways Act 1980 to mitigate the adverse effect of roads on their surroundings have not been used to their fullest extent. It is important to understand the basis of the legislation and the principles of equity and consistency which underpin the way in which discretion has been exercised.
The fundamental principle originally established under the Land Compensation Act 1973 is that a public body that carries out development under statutory powers should provide compensation for the indirect effects of that development on adjacent land interests.
In addition to providing for financial compensation, that Act also gave the Secretary of State for Transport the power to make regulations imposing a duty or conferring a power on responsible authorities to insulate buildings against noise caused, or expected to be caused, by the works associated with road construction or improvement. That power was implemented in the Noise Insulation Regulations 1973. Further provisions contained in the Land Compensation Act included the power for


responsible authorities to carry out additional measures to mitigate against the adverse effects of the construction, improvement, existence or use of the public works.
The provision for compensation was limited to public works completed on or after 17 October 1969. The same operative date was contained in the Noise Insulation Regulations 1973. It was not considered appropriate to specify a retrospective date limiting the power to provide other mitigation measures, because it was intended to cover deserving cases in which properties were affected by roads that had been completed before the specified date, which limited the exercise of the other powers.
It took several years for retrospective cases to be dealt with under the Noise Insulation Regulations. It was not until 1979, under the previous Labour Government, that the power to provide other forms of mitigation was activated. It was made clear at that time that the policy of providing noise barriers alongside existing highways was restricted to roads opened prior to 17 October 1969.
In each case, the decision to provide a noise barrier was subject to the requirement that that would provide a significant degree of relief to a substantial number of properties. It also had to be feasible to erect a barrier within the existing highway boundary as there was no provision for acquiring extra land.
Subsequently, the power to provide measures to mitigate the adverse effects of highway construction was included in the Highways Act 1980. In applying that power to new road construction, it was extended to include a power to acquire additional land on which to construct such measures. That has allowed a much wider view to be taken of mitigating environmental impacts, but the effectiveness of mitigation has always been measured against the number of properties that would otherwise need to be insulated under the Noise Insulation Regulations.
That power has been exercised only in very particular circumstances to provide an additional noise barrier alongside roads built since 17 October 1969. For example, additional noise barriers were placed on the A27 Havant-Chichester route, which was opened in 1988. That was possible because the Noise Insulation Regulations had been revised in that year and specifically provided an allowance for differences between road surfaces. The change meant that a significant number of properties became eligible for statutory noise insulation and it was considered appropriate to provide additional noise barriers instead.
In other cases, barriers have been erected after the road was opened only when the cost has been met by a third party. That has usually been as a consequence of a planning condition attached to residential development. Noise barriers have been provided at the expense of the developer to protect properties, which would otherwise not have been permitted.
This is quite a complicated matter and I have described the provisions of the legislation at some length. In summary, the exercise of discretion to provide noise barriers relates to roads built or improved after October 1969—where a developer or other interested party is prepared to cover all costs—and roads that have not been improved since October 1969 where it can be shown that barriers would provide a significant benefit to a sufficient number of properties suffering unduly from traffic noise.
I understand the argument presented by the right hon. Gentleman that the effects of increased traffic on the section of the M20 to which he referred make his constituents a special case. I am sure that he would acknowledge, however, that there are many sites around the country that are similarly affected by increased traffic noise, both from motorways and within towns.
To consider all those deserving cases equitably would involve substantial costs, even within the existing legislation. There is the issue of whether the public purse should provide benefits in kind to owners of property who either bought at a price reflecting its location relative to the motorway or received compensation when the motorway was first built, to offset the anticipated effect on the value of the property.
When a trunk road is planned to be constructed or improved, an assessment of its environmental impacts and the potential benefits of various types of mitigation takes into account the volume of traffic expected to be using it 15 years after the scheme is first open to the public. I acknowledge that one of the most important concerns discussed at the public inquiry into the proposals to widen the M20 between junctions 3 and 5 was the impact of traffic noise on the surrounding area.
I am aware that the inspector strongly supported the use of porous asphalt, as well as the proposed noise barriers, to reduce the adverse effects. But those measures were discussed in relation to the longer-term effect of the widening proposals.
The right hon. Gentleman was scathing in his criticism of the proposals to widen the M20 and their subsequent withdrawal. However, the draft statutory orders for the acquisition of a small amount of land, mainly needed to provide for additional mitigation measures, were not confirmed. That allowed the local planning authority the freedom to permit development on the land, and released previously blighted properties back on to the market.
I understand the intense disappointment that the right hon. Gentleman's constituents must have felt having been offered some prospect of relief by those widening proposals from the apparently inexorable increase in noise from traffic on the section of the M20 between junctions 3 and 5.
I have to say that the purpose of the mitigation then on offer was essentially to offset the anticipated effect of the widening. However, the assessment of noise impacts arising from the proposals used the updated method of assessing noise levels, which takes account of the type of road surface. It is likely that the original concrete surface and the subsequent surface dressing would probably not have been as quiet as they now can be with the use of modern construction methods.
The right hon. Gentleman referred to the seemingly inexorable increase in road traffic. The Government are committed to developing an integrated transport policy, and the upward trend in traffic growth will be re-examined. For the moment, I must ask the right hon. Gentleman to be patient until the appropriate maintenance programme for that section of the M20 is decided. I have taken careful note of his question and I will certainly ask my officials to respond to it as speedily as possible.
I can assure the right hon. Gentleman that due consideration will be given to noise when the time comes to renew the surface. The technology involved is moving very rapidly and, when the time comes, whatever firm of


surfacing is provided should noticeably reduce traffic noise. The resurfacing of the M20 will be determined when an engineering assessment of the existing surface has been done. It is planned for this year and I repeat that I will ask my officials to respond as quickly as possible to the matter.
I referred earlier to the inspector's belief that porous asphalt could have helped in resurfacing. However, the extra costs for that are no more justifiable than those of noise barriers. It is many times more expensive to put down than other forms of surface and involves extra costs if used on existing roads because drainage arrangements have to be modified. It is more expensive to maintain the surface free of ice in winter—

Mr. Deputy Speaker (Mr. Michael Lord): Order.

Dyfed Powys Health Authority

1 pm

Mr. Denzil Davies: Dyfed Powys health authority may seem an esoteric subject, but it does not to my constituents. It is a matter of keen concern to them, to others in the Dyfed Powys area and to me.
Health authorities buy medical services from hospitals—in the case of Llanelli, from the Prince Philip hospital and one or two smaller ones. If Dyfed Powys health authority goes bankrupt or runs out of money, the hospital services provided for my constituents will deteriorate. I thank my hon. Friend the Member for Bridgend (Mr. Griffiths) for meeting a delegation of hon. Members from the old Dyfed area some time ago. This debate should not be taken as a criticism of that meeting, which was very helpful. However, time has moved on and the situation is changing.
Dyfed Powys health authority resulted from a merger, under the previous Government, of Dyfed health authority and Powys health authority. The area covered by the Dyfed health authority had three acute hospitals and a small number of community hospitals, as they are described. The Powys area had no acute hospitals and a large number of community hospitals. To a city banker experienced in merger negotiations, that situation would have been ideal. One complemented the other: Dyfed provided the acute hospitals of which Powys had none, and Powys provided the community hospitals of which Dyfed had only a few. Real life is not like that, certainly not in the health service.
The new authority inherited many problems, most of them, I am sorry to say, from Powys. It has tried to resolve them. It made various suggestions some time ago to resolve them by closing many community hospitals—

Mr. Richard Livsey: Will the right hon. Gentleman give way?

Mr. Davies: Not at the moment.
The authority also proposed the reduction of services. Those proposals met with universal condemnation and were thrown out. Poor Dyfed Powys health authority is again trying to resolve the matter. In the autumn, it will no doubt advance other proposals. As far I can see, its proposals will aim to improve the financial situation. They will not be for the purpose of improving the health service. The corollary or obverse of improving the health authority's financial situation will be a deterioration of the health services provided for Llanelli and the other constituencies affected. There is not much use in looking at the matter from the point of view of trying to resolve the financial problems in that way.
I do not want to criticise anyone. I do not want to criticise Dyfed Powys health authority because it inherited difficult problems. I am not criticising my hon. Friend the Minister, who has also inherited a horrible situation, but I have several questions. I shall understand if he cannot answer them now. This is an Adjournment debate and, if he is not in a position to answer them, he will no doubt write to clarify matters.
I understand that health authorities make up accounts, although I am not sure in what form, or whether they are audited by outside, independent accountants. Has my


hon. Friend the Minister received the 1996–97 accounts, if they exist, of the Dyfed Powys health authority? Are they properly audited? Who drew them up? Do they set out what one would normally expect to find in accounts—borrowings, assets, loans, liabilities, expenditures, and everything else that people would wish and need to know? When they appear—if they have appeared, fine—could he please place them in the Library for us to try to fathom? I know that it is a long way from mid-Wales or Llanelli, but at least the accounts should be open for inspection so that we can then ask questions about them. Are the accounts in a form that an accountant would not feel disgraced to sign?
My second question relates to debts. I do not understand the structure of health authorities. I tabled a question to my hon. Friend the Minister, which he properly answered quickly. Again, I make no criticism. Perhaps I was naive, but I asked what were the borrowings of the Dyfed Powys health authority from the Welsh Office. The answer that I got was approximately £2.5 million. That surprised me a little because various figures have been bandied around: deficits of £6 million and £7 million. I wondered whether I had missed something. Was it a very carefully drafted answer? I am sure that the £2.5 million figure is correct, but can my hon. Friend say whether there are other borrowings, loans, brokerages or whatever other words can be used to dress up debt? Has Dyfed Powys health authority borrowed secretly from somewhere such as the Drover's bank in Llangammarch Wells? Who knows whether there are liabilities to building societies in small mid-Wales villages? May we be told how much the health authority really owes? I am told that it has money somewhere that should be going to GP fundholders and that it borrows a bit, then pays it back again.

Mr. Livsey: The right hon. Gentleman is making a powerful case about the finances of Dyfed Powys health authority. Does he agree that it is strange that, last October, it said that it would have a deficit of £9 million over the next five years; that in January it said that it would be £11 million over the next five years; and that, in meetings in my constituency in March, it said that, if compound interest were added, it would have a deficit of £38 million over the next five years?

Mr. Davies: We should leave compound interest to the Chancellor of the Exchequer, but I agree. I am as baffled as the hon. Gentleman, and that is one reason for this debate. Again, I do not expect my hon. Friend the Minister to be able to answer fully, but I hope that we can get some figures for the so-called deficit.
What is a deficit? I suppose that a deficit means spending more than is being earned. I do not how to apply that concept to such an organisation. From where does the money come? Does it come out of the dreaded public sector borrowing requirement? That would be terrible. I take it that the £2.5 million comes out of the dreaded PSBR, but what about all the other deficits? Are they added to the wretched borrowing requirement? We should like to be told the answer so that we can assess the position.
I shall now refer to 1997–98, this financial year; we have already asked for the accounts for the last financial year. I do not know how the health authorities are funded. No doubt, a sum of money is provided for them by the

Welsh Office. I am told that there is some sort of formula for local authorities that is called the standard spending assessment. It used to be the rate support grant, but names get changed, although the reality does not.
How much money has the Dyfed Powys health authority received—or will it receive—from the Welsh Office for the next 12 months from this April to next April? We need to know how much it will be so that we know how much it is being paid. Is the figure plucked out of the air? At the meeting with my hon. Friend the Minister, he mentioned a long equation, which no doubt ends in nought—such equations for economists usually end in zero; I do not know why. Could my hon. Friend the Minister send me a letter explaining how the algebraic equation is arrived at? How is the figure arrived at? It is an important question because the spending figure is important. It tells us the amount that can be spent on buying services from the Prince Philip hospital in Llanelli and from other hospitals. I do not expect to be told the equation now, but we need to know it so that we can work out—or be told—exactly how much money is allocated for this year. What will the deficit be for this year? Apparently, there will be one. Is the deficit rolled on every year until the Welsh Office has to provide a loan?
The Llanelli-Dinefwr hospital trust operates the main hospital in my constituency, the Prince Philip hospital, and other hospitals, but there is still no negotiated contract. I raised that issue with my hon. Friend the Minister and he made some helpful comments. I am told that there is no negotiated contract between those hospitals and the health authority.
We have the extraordinary situation whereby a public body—the health authority—pays what it can. It is as though I went into Tesco in Llanelli, took a trolley full of food to the till and said that I could afford only £5 and the shop could possibly have the rest later. When will the contract be signed? If a contract is not signed on satisfactory terms, the Llanelli-Dinefwr hospital trust will run up debts. As the Minister knows, that trust runs a tight ship—it has never been in debt and it balances its books—but I am told that, if the situation continues, by the end of this financial year the trust could be in debt to the tune of at least £1.5 million.
In reply to another question, which is not relevant to this debate, my hon. Friend the Minister said that Morriston hospital was now in debt to the tune of £16.5 million. I do not want that to happen to my hospital trust. It would not be fair if it had to pile up debts that were not of its own making and then had to do something in future to try to reduce those debts. Could that contract be negotiated fast so that the trust does not run up a debt like the one that has been run up by Dyfed Powys health authority?
There is no solution to the problem to be found in measures to reduce the bureaucracy of the Dyfed Powys health authority. It is always possible to find savings in a bureaucracy, but that will not solve the problem. The difficulties should not be solved by cutting services. I am sure that my hon. Friend the Minister would agree that the problem should not be solved in that way. I am sure that he will also agree that we should not come up with a plan to solve financial problems by cutting services. We are not looking to improve hospital services in Llanelli, merely for them to be at least maintained. If the financial plans are put into operation, health services will deteriorate. People who voted for us and for my hon.
Friend the Minister at the last election did not vote for a deterioration in existing services—within realistic boundaries, they want improvements.
Ultimately, the only solution to the problem comes from money from the Welsh Office. That money must be used to wipe out the debts and place the health authority on a proper basis to ensure decent hospital services. I understand that now, a few hours before the Budget, is not the best time to talk about money, but there is plenty of it about. As a former Treasury Minister, I find it difficult to say that—it sticks in my gullet—but there is plenty of money. Even the City and the Confederation of British Industry want to increase taxes.
What is my right hon. Friend the Chancellor going to do with those taxes? I know that he is a Scotsman, but I hope that he will not put the money into a tin trunk under his bed. Everyone wants increased taxes and everyone wants the Government to have more money. Some of that money should be used for these purposes; I know that it is not easy, but there is no shortage of money at the moment. It is a question whether we have the will to use that money to sort out the problem which, although not of my hon. Friend the Minister's making, nevertheless exists. The problem can be solved only with money, not by the deterioration of hospital services in my constituency.

The Parliamentary Under-Secretary of State for Wales (Mr. Win Griffiths): I congratulate my right hon. Friend the Member for Llanelli (Mr. Davies) on securing this important debate so soon in the life of the Parliament. I am grateful to him for bringing this issue to the attention of the House. The publicity that has surrounded the difficult financial position in Dyfed Powys health authority has aroused considerable strength of feeling locally and I welcome the opportunity to debate the matter in this forum.
Before we go into the detail, it is important that I explain something of the background to the position that we have inherited. Back in the early 1990s, as part of the market reforms, the previous Government decided that funding for health care should be population based—health authorities should receive money to meet the health needs of the residents living in the authority area. Money would follow the patient so that, no matter where treatment occurred, the health authority would still have to pay. Under that policy, the capitation formula used to distribute resources provided by Parliament showed that, if the total amount of cash were allocated solely according to population rather than on the old service basis, some authorities were not getting enough cash while others were receiving too much. Dyfed Powys was one of the authorities that was receiving too much.
To enable a more equitable distribution, a weighted capitation formula was introduced and the move to it was phased over five years. Funding by a weighted capitation approach seeks to take account of the need for health services in a population by adjusting the crude population share according to various factors. Those are chosen to show the relative demand for health services and include, for example, the relative death rate and the proportion of elderly people. I am quite sure that my right hon. Friend

can be given information on how that formula works. This financial year is the last year of transition to that arrangement.
As a result of that readjustment to the existing capitation formula, over the past four years, the allocation for Dyfed Powys health authority has risen by only 19 per cent. compared to growth across Wales of 23 per cent. Nevertheless, the formula and the arrangements for its phased introduction were designed to provide time for the service to plan and were agreed with the NHS in Wales. While I expect that the process was manageable, it would have posed some difficult choices for the authorities involved.

Mr. Lembit Öpik: Does the Minister agree that, even with a transition time, the provision in rural areas will not become any cheaper? We have therefore compounded the problem—the net income per capita is coming down, but the problems of increasing elderly provision are rising. That is why so many of our residents in Powys have been concerned about the future of the cottage hospitals which seem to be under threat for the very reason that the Minister was giving.

Mr. Griffiths: As services for the elderly are increasing, the capitation formula will be of some help. Like the hon. Gentleman, I am concerned about the future of the health service, not only in rural areas, but in industrial areas. Although the formula has been accepted by the NHS in Wales as a robust means of distributing resources, my officials have convened a working group consisting of a wide range of NHS interests in order to review the methodology. I believe that that is necessary for a number of reasons.
Since the formula was introduced, there have been developments in the approach to determining health need; health authorities in Wales have been reorganised; and new sources of information on the health status of the population have become available—for example, the Welsh health survey. We must consider, together with the service, whether any of those developments should influence our approach. It is my intention to ensure that the distribution of resources between health authorities in Wales is done in the most effective and efficient way, but, clearly, these are early days and we cannot predict the outcome of the review or its effect on any particular health authority.
That is for the future. I shall now answer one or two of my right hon. Friend's questions.

Mr. Cynog Dafis: When it is reviewed, the formula must take account of rurality in relation to the provision of hospital services.

Mr. Griffiths: There is an element for that in the current formula, but there may be a need to consider whether its weighting should be increased. That is one of the matters that the review group will consider.
This year, Dyfed Powys received £265 million for hospital, community and family health services, including £257 million that is available for the authority's discretionary expenditure—that is, to purchase health services according to local priorities. The sum represents an increase in funding of 2.6 per cent. over 1996–97, which in cash terms means that the authority received an


additional £6 million. As well as funding for hospital, community and family health services, almost £10 million was allocated to the authority for cash-limited general medical services—£600,000 more than in the previous year, or an increase of more than 6 per cent.
Of course, the move to weighted capitation funding has not been made any easier by the decision to reorganise health authorities. The new authority was created on 1 April 1996 and its unaudited accounts for its first year show a deficit of £1.9 million, adding to its inherited deficit of over £3 million. I assure my right hon. Friend the Member for Llanelli that such accounts do get properly audited and that he will be able to receive a copy of them. In addition, I cannot envisage any difficulty in placing a copy in the House in Commons Library.
In income and expenditure terms, the authority is obviously spending more money than it receives from the Welsh Office and, as I told my right hon. Friend when we met recently to discuss the matter, I have been asked to provide additional resources to help overcome that situation. In considering that, it should be recognised that, in allocating resources to authorities, the Welsh Office does not routinely keep cash in reserve at the centre. Consequently, we expect authorities to live within the resources allocated to them. Despite that, we try to be flexible and, in 1995–96, the Welsh Office provided a loan of £810,000 to the former Powys health authority, and, in 1996–97, provided the new Dyfed Powys authority with a further loan of £1.7 million. Therefore, as my right hon. Friend rightly said, the Welsh Office is now owed £2.51 million.
The authority has asked fir a further loan in the current year totalling well over £5 million. That is a considerable sum and, although it helps with cash liquidity to pay bills in the short term, it masks a much more serious underlying problem about the ability of the authority to maintain its existing level of commitments in future years. Cash injections in the form of repayable loans may have a part to play in managing the short term, but I would be unwilling to countenance their use as a substitute for addressing the underlying resource problem. Moreover, I am sure that, as a former Treasury Minister, my right hon. Friend would agree that, before I can reach a decision, it is essential that the authority produces a plan to demonstrate how it will get back to a balanced position. That is awaited, but, in the meantime, officials are giving the matter careful consideration and I hope to announce a decision this month.
From all of that, it is clear that the current contracting round with the authorities' main providers in the area is going to be very difficult and I can understand the frustration of all the trust chief executives. Representatives of the Llanelli trust have impressed on me their frustration—indeed, the small delegation from that trust which accompanied my right hon. Friend gave me a clear picture of the situation. I understand that, until contracts are agreed, temporary arrangements have been put in place to ensure that patient services—which must be the prime consideration—are not disrupted and trusts have a cash flow.
As I mentioned earlier, the provision of cash loans is not the only answer and neither can we add more money permanently to the allocation. That would create an imbalance in the move to a capitation-based mechanism and cause tensions elsewhere in Wales. The way forward is for the authority to develop a more acceptable strategy

for the delivery of health care to its resident population than was proposed in the consultation document "Effective Care and Healthy People". That was intended to provide opportunities for residents and others to contribute to the review of health care provision in the area.
As my right hon. Friend will know, after considering the responses to consultation, the authority decided at its board meeting on 3 June that it should work with local interests to produce a revised strategy. A progress report on work towards completion of the revised strategy is to be made to the board in the autumn. It is now for the authority to take the matter forward, although I shall continue to take a keen interest and have asked to be kept closely informed of developments.
Of course it is not simply a matter for the health authority. The trusts in the area do need to play their part and, although I understand the difficulties they face, they must realise that resources are severely stretched. They will need to ensure that their organisations operate as efficiently and as effectively as they can. That will often mean careful consideration of the management of the capital estate, much of which is old, poorly maintained and in many cases not suited to modern health care techniques. Some estate rationalisation might therefore be necessary.
The Powys trust is developing proposals with the private sector for the rationalisation of patient and support services currently provided by Bronllys and Mid-Wales hospitals. That will enable the old establishment at Talgarth to be closed. Hospital services at Newtown will also be redeveloped in a new hospital to complement the services envisaged at Bronllys. The total cost of the two new developments is almost £19 million and negotiations are currently under way with the private sector to develop those schemes. The estate rationalisation flowing from the projects is likely to result in cost savings that will go some way to alleviate the financial problems of the authority.
In my right hon. Friend's constituency, the Llanelli trust is currently working with the Pembrokeshire and Derwen trusts in the development of proposals for elderly people that will incorporate alterations to Mynydd Mawr, Tumble and Bryntirion hospitals, and also for the reprovision of in-patient psychiatric services from St David's hospital, Carmarthen and Bryntirion hospital, Llanelli on to the Prince Philip hospital site. Those proposals will also allow some site rationalisation that may result in cost savings to the authority.
I was also interested in the plans that the Llanelli trust has in mind for an integrated model of care delivery in the Llanelli-Dinefwr area. As I explained to the chairman and chief executive of the trust when I met them with my right hon. Friend, the proposals need to he properly costed; nevertheless, it is encouraging that the trust and local GPs are working together. The GPs will need further to develop their thinking and perhaps consider producing clear, costed proposals for consideration as one of the locality commissioning pilots which I announced last Thursday.
From the Government's point of view, I think it important to recognise that the position that we inherited cannot be dealt with overnight. There will be situations like the one in Dyfed Powys when there is a need for everyone to pull together to ensure that patient services are not affected; that will entail co-operation and compromise locally.
My right hon. Friend will know that I have already suspended the eighth wave of GP fundholding. That will release £1.9 million, to be used to reduce cancer waiting lists and for developments in primary care. I announced a wide-ranging review of the number and shape of NHS trusts in Wales, and it will get under way soon. We are also issuing a White Paper in the autumn to abolish the internal market—

Mr. Deputy Speaker (Mr. Michael Lord): Order.

Public Bodies (Food Purchasing)

Mr. Ieuan Wyn Jones: I welcome the opportunity to debate this important subject. I thank the Minister in advance for responding to this debate and to the previous one. I know that he is having a heavy day in the Chamber; I am sure that when he eventually returns to Gwydyr house he will insist on being served a good lunch of Welsh lamb or Welsh beef—a decent recompense for his hard day's work in the Chamber.
There is a crisis facing the livestock sector in Wales. I informed the Minister's office that I would concentrate today on the crisis in the beef sector, especially in Wales—although I understand that the issue is also important in the other countries of Britain.
I need not remind the House of the crisis that the industry has faced for the past 15 months. The difficulties that followed the announcement by the then Secretary of State for Health on 20 March last year have been severe for the industry. That statement will be etched on the memory of farmers for a long time to come. I shall not recount the events since then in any detail—merely say that I have attended more mass meetings of farmers who are worried about the crisis than I have at any time in the past 20 years or so.
Most farmers were under the impression that once the over-30-months scheme was nearing a conclusion the crisis would probably be over. They thought that confidence and prices would start to recover, but things are worse now than they were at the height of the crisis. Prices in the marketplace are lower and farmers are losing a considerable amount of money on the cattle that they sell for slaughter. Such losses cannot be sustained for much longer. Interest rates have been historically low, but there are signs that they will rise in the next 12 months, thus adding to the pressure on farm incomes.
I accept that the fall in beef prices is due to a combination of factors. First, there is the revaluation of the green pound and the failure of the previous Government to ask for European Union money to alleviate the consequences. I hope that the new Government will make positive moves to rectify that. Secondly, there is the importation of beef from EU and third countries—beef that does not meet the high hygiene standards in the UK imposed as a result of the BSE crisis. Thirdly, the market has yet to recover the full confidence that it enjoyed before the BSE crisis erupted.

Mr. Lembit Öpik: Does the hon. Gentleman agree that British and Welsh beef is now the safest that can be bought anywhere in the world?

Mr. Jones: That is a good point. I shall reiterate it to the Government with some force before the end of this short debate.
The decision by the current Government to cut compensation for beef farmers entering the over-30-months scheme has caused considerable resentment in the industry. The Government need to recognise—whether we like it or not—that the compensation price affects the market price. The great danger that many farmers perceive is that the cut in the one will affect the other—the market price will fall even lower.
I acknowledge the considerable cost to the Exchequer resulting from the BSE crisis and I know that that cost has been revised upwards in recent days, but I hope that the Minister will recognise the importance of agriculture to the rural economy. We need to underpin that economy; anything that affects beef producers is bound to have a deleterious effect on the rural economy.
Farmers recently received a significant boost when McDonald's said that it would reintroduce British beef to its fast food outlets. That showed that confidence is returning to the industry. It is thus all the more surprising that many public bodies in Wales and the rest of the United Kingdom buy the vast bulk of their beef from abroad. When I looked into it, I was astounded by the scale of this purchasing problem.
I have a letter from the chief executive of the Naval Bases and Supply Agency stating that the task of procuring food for the armed forces is contracted to the Navy, Army and Air Force Institute. I am told that some British beef is purchased, but that
the Armed Forces' requirement is mainly for frozen products and the majority of beef joints are sourced on cost grounds, from Brazil, Uruguay, Argentina, New Zealand and Australia.
So none of this frozen beef is bought in Wales or anywhere else in the UK.
I have also inquired about the purchasing policy of health trusts in Wales. Many of them are located in prime beef-producing areas. My office was able to contact eight trusts; of those that could supply me with information, none had a policy that ensured that local beef was purchased as a matter of course—although some local beef was used. They all said that they now had to ensure value for money. The trusts that gave me information included the Bridgend and District NHS trust, the Carmarthen and District NHS trust, the Clwydian Community Care NHS trust, the Derwen NHS trust, and the Glan Clwyd District General Hospital trust. Some of them did not even know where their meat came from.
I understand that most, if not all, of the trusts in Wales receive their supplies under standard contracts negotiated by Welsh Health Supplies, which is a business unit of the Welsh Health Common Services Authority, or WHCSA. The NHS in Wales ceased purchasing carcase meat some time ago, moving to prejointed frozen cuts. Under the current arrangements, those frozen cuts of beef, lamb and pork come from South America, New Zealand and the home market respectively. That may be good news for Welsh pig farmers, although there are not many of them, but it is very bad news for the vast majority of Welsh farmers who are lamb and beef producers.
The good news, however, is that WHCSA is reviewing the policy and the balance between frozen and fresh meat and asking for more flexibility to be applied to contracts. On behalf of Welsh beef and lamb producers, I ask the Minister to urge the authority to introduce these proposals at an early date.
I have also made some inquiries with local education authorities in Wales about their school menus. The Minister will be aware of the report in the Western Mail in March of this year which stated that most schools in Wales did not serve beef to children. At the time, 13 of 22 LEAs were operating policies that totally or partly excluded locally produced beef from school menus. Of those 13, seven operated a total ban on beef, one gave head teachers discretion to use imported beef and five

excluded beef from primary schools. My office contacted some of those LEAs and found that, in Cardiff, beef is on the menu only in secondary schools. Even there, there is no policy of buying local beef and LEAs follow what is described as the value-for-money rule.
In Denbighshire, an area noted for quality agricultural produce, beef is banned in primary schools and in secondary schools, where beef is offered and there is a choice, there is no policy to buy local beef. All meat is bought through a purchasing consortium.
In Rhondda Cynon Taff, all the beef used is imported, although I am pleased to say that a review of that policy is taking place.
The purchasing policy of Ynys Môn and Gwynedd county councils specifies the use of locally killed beef in schools.
Needless to say, the farming unions in Wales want the Welsh Office to encourage public bodies not only to purchase beef, but to buy locally produced meat. They and I understand that no one can be forced to buy or eat Welsh meat, but the Government can use their considerable authority to encourage its consumption.
In a letter to me, the Farmers Union of Wales asks that the Government positively discriminate in favour of fresh, home-produced meat, the value and quality of which are second to none. It would also help if the Government advocated the specification of fresh as opposed to frozen products in public body contracts. Such a move would be greatly welcomed.
The NFU has told me that, following the decision by McDonald's Restaurants to obtain local beef, it is renewing its strong invitation to public bodies to source their beef from British supplies.
The industry generally welcomed the stance taken by the Minister of Agriculture, Fisheries and Food when he made it clear that he expected imports from the European Union to meet the standards on the removal of specified bovine material that must be met by British beef and that, if they do not, orders banning imports will be laid before the House. He repeated that warning on the Floor of the House during the recent debate on the common agricultural policy.
Given that that is the Government's position, that—as the hon. Member for Montgomeryshire (Mr. Öpik) said—beef is safer than it has ever been and that we now have stringent hygiene standards, I believe it is right to expect Ministers to encourage its consumption now. It is ironic, is it not, that while statements in the House and elsewhere are made about the nutritional quality of locally produced beef, hospital patients, members of the armed forces and schoolchildren are eating beef from every country under the sun except their own. It is ironic, therefore, that the Government are not bringing pressure to bear on public bodies.
I believe that we are entitled to ask today for a clear statement from the Minister that all contracts entered into by public bodies for the purchase of meat be reviewed so that locally produced meat can be considered. That can be done quite easily by stating that they should consider fresh meat as well as, or instead of, frozen meat. That would give public bodies a clear signal that they should buy local beef.
There are encouraging signs from the WHCSA and local education authorities. I am asking the Minister to give a clear signal to those that are not moving in that


direction to consider their contract sourcing policy. Will he encourage the local education authorities who still refuse to have beef on their menus to think again?
I feel that a bigger battle lies ahead with the purchasing policy of, for example, the armed forces. I made contact with the Ministry of Defence during the period in office of the previous Government; I have done so again, and there appears to have been no movement on their part. Will the Minister talk to his colleagues in the Ministry of Defence and at least ask them to review the position? The public pronouncements on the value and quality of our beef will ring a little hollow unless those organisations of which the Government have control start to change their purchasing policies.
I know that the Minister will have listened very carefully to my speech today. I hope that he can respond positively.

The Parliamentary Under-Secretary of State for Wales (Mr. Win Griffiths): I congratulate the hon. Member for Ynys Môn (Mr. Jones) on successfully securing this Adjournment debate. I am pleased to have the chance to respond on the important issues that he has raised. They are near to the heart, mouth and stomachs of consumers, who want safe food, and of producers, who provide it. The issue is one of confidence. I am convinced that confidence is justified.
Let me set out our approach to dealing with the impact that BSE has had on the beef industry—especially confidence in British beef. Throughout the crisis, the Spongiform Encephalopathy Advisory Committee has been a source of independent advice. It has advised on a range of precautionary measures to minimise the risk to human health. Scientists can never guarantee that there is no risk, but SEAC's chairman, Professor John Pattison, is on public record as saying:
in any common usage of the word, beef is safe to eat".
That is the starting point for the restoration of consumer confidence in beef.

Mr. Barry Jones: The leaders of the NFU in Flintshire were very grateful to my hon. Friend for receiving their recent deputation. The worries continue. The leaders of the National Farmers' Union of Flintshire—Mr. Idris Roberts of Pwll farm in Treuddyn and the farmer who leads the NFU of Flintshire in Carreg y Llech, Mr. Terrig Morgan, also in Treuddyn village, say that they still have considerable worries and urge the Minister and the Government to continue to do everything possible to help their industry.

Mr. Griffiths: I thank my hon. Friend for that intervention. I hope that what I have to say will be helpful and that other continuing negotiations will prove to be helpful.
The hon. Member for Ynys Môn mentioned the announcement made last week by McDonald's Restaurants that it was resuming use of British beef products in its United Kingdom outlets. I am very encouraged that that decision was taken as a direct response to the views of customers, and I believe that, last night, Burger King made a similar announcement.
In March 1996, directly after the announcement of a possible link between BSE and the new form of CJD, 70 per cent. of people surveyed by McDonald's Restaurants said that they would not buy British beef products. Now, however, there has been a complete reversal. A recent survey showed that 74 per cent. of people wanted McDonald's to sell British beef and it has followed customer preference. I am glad that Burger King has now done the same.
That is clear evidence that consumers' confidence in British beef is returning. Beef consumption as a whole is now only 3 per cent. below pre-crisis levels. In June, sales of beef in Wales were 42 per cent. greater than in the same period in 1996—the highest percentage increase in the United Kingdom.
I turn now to the issue of NHS trusts using British beef. Although NHS trusts are accountable to the Government, it is not our role to dictate what they should or should not do across a wide range of their responsibilities. Into that category falls the source of the beef provided to patients. Decisions about hospital meals are made by local management, in the light of central guidance.
Trusts in Wales as elsewhere, receive guidance on issues such as hygiene and dietary standards and are expected to provide patients with a choice of meals that respects their dietary needs. Information on CJD and BSE has also been sent to trusts, but the use or non-use of British beef has not been stipulated, and is not monitored centrally. However, I can tell the hon. Gentleman that I am receiving anecdotal evidence from trusts that they are reviewing that policy, and I hope that what is said in the Chamber today will give them confidence to make other moves.
The inclusion of beef on the menus of local authority schools is a matter for individual local authorities. They have been advised that there is no reason to withdraw beef from school menus, but they should continue to provide a choice of menu to accommodate different dietary and cultural preferences. I believe that beef can form a part of any well-balanced nutritional diet for our children, and I hope that local education authorities will take that view on board.
Before 20 March 1996, public bodies were under no obligation to restrict their beef supplies to those from Wales—or even from the United Kingdom generally. Indeed, the treaty a Rome prohibits public bodies from discriminating in favour of national interests. Consequently, Governments could not force public bodies to source their beef in Britain, even if they wished to do so. In any event, that should remain a matter for local discretion. Patients in hospitals, and school children and their parents are also consumers. Like McDonald's, trusts and schools that have stopped using British beef will use it again if that is what patients or parents and their children want.
Last summer, under the previous Administration, representations were made to the Ministry of Defence in a bid to reduce the armed forces dependency on imported beef. The MOD was supportive, but maintained that procurement of any goods should be on the basis of best value for money. The MOD purchases a limited amount of beef, but its decision to buy more imported beef is based on market conditions and suitable distribution services, rather than reaction to BSE. Perhaps the British beef industry should therefore speak to the MOD about how it might play a bigger part in supplying it.
The Government cannot force consumers, whether they be at home, in schools, in hospitals or in the armed forces, to buy and eat British beef.
Our role is to safeguard the public interest and to make sure that the public are aware of the facts so that they can make decisions for themselves. To that end, measures were, and continue to be put, in place to ensure the safety of public health. Cattle suspected of BSE are compulsorily slaughtered and their carcases destroyed. Healthy cattle more than 30 months old may not enter the human food chain—they are slaughtered separately and their remains destroyed.
Milk produced from cows suspected of having BSE may not be used for human consumption, despite the fact that infectivity has not been found in milk. Specified risk materials—the head, brain, spinal cord, tonsils and spleen from cattle over six months, and the thymus and intestines from cattle of any age—may not go into the human food chain.
Those measures are enforced by the Meat Hygiene Service, a Government agency. In addition, the State Veterinary Service makes unannounced audit visits to abattoirs to ensure that the controls are fully enforced.

Mr. Nigel Evans: The Minister says that he will not dictate to public bodies that beef should be on the menu, but will he positively encourage them to put beef back on the menu?

Mr. Griffiths: I hope that my speech will be a signal of encouragement to public bodies in Wales and the rest of the United Kingdom.
The hon. Member for Ynys Môn will also be aware that the Commission last week announced that it would take action against member states, other than the UK, that fail to enforce adequately the ban of meat and bone materials in feed for ruminants. I welcome the recognition that UK controls are now the strictest in Europe.
I also welcome the Commission's publication of rules for removing risk materials from meat produced throughout the European Union. I very much hope that the Agriculture Council adopts that measure in the near future.

Mr. Richard Livsey: Will the Minister assure us that if that is not accepted by the Agriculture Council, he will instruct authorities in Wales not to accept beef products from countries that refuse to follow those guidelines?

Mr. Griffiths: The hon. Member stopped me in my tracks; I was about to consider that very point. I am sure that he knows that the Minister of Agriculture, Fisheries and Food, my right hon. Friend the Member for Copeland (Dr. Cunningham), announced recently that we will apply the same controls to imported meat as we do to our own. This is not a ban on imports—the controls will apply in the United Kingdom—but it will reassure consumers that any beef that they eat here is produced with the same rigorous attention to safety.
We hope that those steps to restore confidence in British beef will be taken on board by the public at large. We know that the final step in restoring full confidence in British beef will be having the export ban lifted.
We have fulfilled the Florence pre-conditions and we now need recognition of the measures taken and sacrifices made. Lifting the ban will not be easy, particularly in the light of the negotiating failures of the last Administration, but we hope that this Government's constructive and positive approach to the Commission's ruling will pay dividends. We are, at this very moment, exploring with the Commission how we can best move forward.
We shall give a detailed technical response to the points made by the EU's scientific veterinary committee on our certified herd proposals very quickly. We recognise that consumers in all member states will be anxious to have full assurances in line with scientific assessment of the risk. At the same time, we will press for the ban's removal where those assurances can be given.
In addition, in order not only to restore the pre-crisis level of beef sales but to increase them, we need to make consumers more aware of the quality and versatility of the product. That can most effectively be done through efficient marketing and promotion activities. The Government are taking steps to promote beef and beef products.
The hon. Member for Ynys Môn will know that, in Wales, the body charged with undertaking that task on behalf of the Welsh food industry is Welsh Food Promotions Ltd., which is actively supported by the Welsh Office. In the past year, it has sponsored numerous promotional events, including the Welsh beef championships; promoted our beef at food events both at home and abroad; and is working with mainstream retailers to secure contracts for Welsh producers and processors. It also operates schemes such as the farm assured Welsh livestock scheme, with more than 3,000 members, to help give consumers confidence in the quality of Welsh beef.
I hope that Welsh beef farmers will also consider how they might come together, for example in co-operatives, to negotiate with supermarket chains and provide them with a ready supply of good-quality beef.

Mr. Cynog Dafis: Are not animal welfare and environmental sustainability also relevant to the marketing of both Welsh beef and Welsh lamb? Are not extremely high standards of animal welfare maintained in the production of Welsh beef and lamb?

Mr. Griffiths: Yes. The hon. Member makes a worthwhile point. We must bear in mind the fact that both beef and lamb farming have extensive and traditional methods of rearing animals, and people can be reassured of the humane way in which the animals are brought up and cared for.
The measures that the Government and by agencies such as Welsh Food Promotions Ltd. have taken will restore public confidence in beef. Indeed, the evidence shows that that is beginning to happen already. The Government can demonstrate clearly the safety of British beef. Once that has been accepted by our European partners, British beef will once again take its place as a product of the highest quality on international markets.


The Government are also negotiating with theCommission to create the means by which that can be brought about. In the meantime, we are actively involved in helping the farming and food industries to promote British beef to the consumer as a quality product.
I can only hope that all those involved in purchasing, on behalf of the public, in public organisations such as NHS trusts, local government and Government

Departments, will take heart from the fact that the Government are confident that British and Welsh beef is a quality product, produced under the most stringent public health and safety conditions, and that all consumers can purchase and eat it with confidence.

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions — DUCHY OF LANCASTER

Sub-standard Contract Work

Mr. Rhodri Morgan: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the conditions relating to sub-standard performance by a private company carrying out work subsequent to market-testing which could lead to termination of its contract. [4927]

The Parliamentary Secretary, Office of Public Service (Mr. Peter Kilfoyle): Contracts with private companies should set out, among other things, the agreed standards of performance and the action to be taken if those standards are not achieved. Although general guidance is available, the precise conditions in each case will depend on the particular services to be provided and the expectations of the public body issuing the contract.

Mr. Morgan: I am sure that the Minister is aware that yesterday, Capita completed the first year of its three-year contract running the telephone inquiry service at Companies House in Cardiff. Is he also aware that for much of that first year Capita was operating at below 30 per cent. of the agreed standard of answering the telephone within the first six rings? In the light of that, will he agree to review the contract in its entirety?

Mr. Kilfoyle: I am sure that my hon. Friend will appreciate that that is primarily a matter for the President of the Board of Trade. I am sure that he will take the matter up with her, and I also undertake to do so.

Small Businesses

Mr. Bayley: To ask the Chancellor of the Duchy of Lancaster what measures he has taken to reduce the burden of bureaucracy on small businesses. [4928]

Mr. Kilfoyle: As promised in our manifesto, we are in the process of appointing a revitalised task force, half of whose members will represent small business. We look forward to working with them to cut red tape and ensure that burdensome new regulations are not imposed on small businesses.

Mr. Bayley: I welcome the fact that small businesses will be involved in that process. The small business contribution to the Government's welfare-to-work programme will be extremely important. As someone who has set up and run a small business, may I tell my hon. Friend that there should be necessary regulation to protect businesses, staff and customers, but that unnecessary regulation is a headache? Will he spread the message among all his ministerial colleagues to make sure that regulation is fine tuned so that it is imposed only where absolutely necessary?

Mr. Kilfoyle: I congratulate my hon. Friend, who has a long and proud record of an enlightened approach to government, especially in the local government arena.

We have already made many contacts with Ministers cross-departmentally about the virtues of better quality regulation. We will shortly be establishing a cross-departmental "access business" group of Ministers so that we can break down many of the existing barriers for small businesses. We hope to achieve that by means of the most appropriate forms of information technology currently available.

Open Government

Mr. Miller: To ask the Chancellor of the Duchy of Lancaster what measures his Department is taking to improve openness in government. [4929]

The Chancellor of the Duchy of Lancaster (Dr. David Clark): I hope to publish a White Paper on freedom of information before the summer recess.

Mr. Miller: I am grateful, as I am sure that the entire House will be, for that answer. Will the Bill ensure that quangos are more open and accountable?

Dr. Clark: My hon. Friend has a long record of trying to promote openness in government. I well recall his successful efforts to ensure that Hansard went on the Internet. He has my assurance that we are determined to make quangos more accountable and open. That will certainly be covered by the Bill. In the meantime, my colleagues and I are keen to encourage the appropriate bodies to take heed of that and to consider ways of making their activities more open to the general public.

Mr. Forth: Will the right hon. Gentleman extend his support for openness in government to openness with the House? Does he expect to set a personal example in that regard?

Dr. Clark: Yes.

Mr. Mackinlay: In his review of open government, will my right hon. Friend contemplate considerably reducing the embargo on public records from 30 years? We should like to scrutinise the records to find out whether, during their negotiations in 1982, the Conservative Government contemplated handing over the Falkland Islands this year. Some openness on the stewardship of government by the Tories in the past 18 years would be most welcome.

Dr. Clark: We shall certainly look at the possibility of opening up more of the Public Record Office and reducing the 30-year rule. Those matters will be covered in the White Paper.

Mr. Maclennan: I welcome the information that the Chancellor of the Duchy provided at the beginning of his answer. Does he favour greater openness in respect of the budgetary process so as to open up for responsible fiscal debate the options that the Government are considering? While recognising that certain price-sensitive information cannot be published, does he agree that much of the rigmarole that we have today is fuddy duddy, archaic and unhelpful?

Dr. Clark: It is my intention that when we introduce a freedom of information Bill we should exclude as little as


possible. The issue of advice proffered to Ministers must be weighed up, but I intend to ensure that factual and analytical information is made available as widely and openly as possible.

Mr. Sutcliffe: My right hon. Friend will know that under the previous Government a fifth of all public spending was in the hands of 70,000 quangocrats. Will he make sure that his review examines the position of the Tory place men and women?

Dr. Clark: We are currently looking at the position of quangos and I hope to deal with that issue when we produce our White Paper on better government later this year.

Mr. William Ross: As so much of Northern Ireland is controlled by quangos, the right hon. Gentleman will understand that we have a particular interest in openness in government. Given also the statement yesterday by Mr. Ray Burke, the Foreign Minister of the Irish Republic, that if a parade were forced down the Garvaghy road, there would be
serious implications for matters in this island",
will the right hon. Gentleman undertake to publish all the minutes of meetings of the intergovernmental conference and the secretariat?

Dr. Clark: I think that we are straying somewhat off the point of the question. We want to try to achieve as much consensus and openness as possible. If the hon. Gentleman and his colleagues would like to discuss their views on the issues of freedom of information, we shall happily listen to them.

Mrs. Gillian Shephard: In the interests of open government, would the right hon. Gentleman be kind enough to describe to the House the nature of the inquiry into the allegations by the hon. Member for Blaenau Gwent (Mr. Smith) announced by the Prime Minister last Wednesday? By whom was the inquiry conducted? Who was interviewed and by whom?

Dr. Clark: I very much welcome the right hon. Lady to the Dispatch Box in her new capacity. I hope that her tenure there will be long and happy. Her question is not within my responsibility and she must pursue it through the appropriate channels.

Food Safety

Mr. Ben Chapman: To ask the Chancellor of the Duchy of Lancaster how many representations his Department has received on issues relating to food safety. [4930]

Dr. David Clark: The consultation period on a food safety Act and the James report closed on 20 June. I am delighted to say that, as of yesterday, more than 600 responses had been received. In addition, ministerial colleagues in other Departments and I have met many other organisations representing a wide cross-section of interests, including consumers, retailers and producers.

Mr. Chapman: I thank my right hon. Friend for that answer. Does he agree that if such consultations had taken

place earlier, under the previous Government, we might have avoided many of the expensive difficulties that resulted from their inactivity?

Dr. Clark: My hon. Friend makes a pertinent and real point. We have campaigned for many years to get a food standards agency. Indeed, I remember advancing that proposal about 10 years ago, but it was met with derision by the then Conservative Government.
The James report was commissioned by the Labour party. It has been widely recognised as a great step forward and I believe that it will do a great deal to restore public confidence in food in Britain.

Mr. Soames: Does the right hon. Gentleman agree that the food and farming industries are among the most successful in this country? [Interruption.]

Madam Speaker: Order. We must have some order in the House. It is difficult to hear hon. Members who are speaking. I want order from now on.

Mr. Soames: Does the right hon. Gentleman further agree that it is extremely important that any proposed legislation emanating from his review does not overburden those extremely important and successful industries?

Dr. Clark: I fully accept that the food and farming industries in Britain have a good reputation. However, there have been a number of food incidents and a number of people have died as a result. It may be that some of those incidents could have been avoided if proper regulations had been in place. Certainly, a great deal of Exchequer money could have been saved if we had avoided the food scares and incidents.
The whole point of a food standards agency is to ensure not only that the British people have confidence in the food that they eat, but that they are able to have access to the best scientific advice on food issues.

Mr. Lawrie Quinn: To ask the Chancellor of the Duchy of Lancaster what progress has been made in setting up the food standards agency. [4931]

Dr. David Clark: We have consulted on the report from Professor James. I propose to make a statement before the summer recess, and it will include a summary of the responses. We aim to produce a White Paper in the autumn and will consult further on a draft Bill thereafter.

Mr. Quinn: I thank my right hon. Friend for his answer. Although I am interested to hear of the progress on the timetable for the setting up of the food standards agency, will my right hon. Friend say something about any interim measures—[Interruption.]

Madam Speaker: Order. I have just called this House to order. Conversations are far too noisy. I can hear the hon. Gentlemen on the Bench behind the Member who is speaking. Settle down.

Mr. Quinn: Thank you, Madam Speaker.
What interim measures does my right hon. Friend propose before he can set in motion the timetable that he outlined? On behalf of the pensioners in my constituency of Scarborough and Whitby, I can say that we urgently want a food standards agency. We want to know what interim measures are proposed.

Dr. Clark: My hon. Friend has raised a serious point. Clearly, it will be some time before the food standards agency is established. We have worked together to ensure that a whole raft of proposals will guarantee that food safety is improved as much as possible. My right hon. Friend the Minister of Agriculture, Fisheries and Food has established a food standards and safety group to bring together areas central to food standards and food safety issues within his Department—all, we hope, under one roof and one chain of command. Accordingly, the Department of Health is revising its codes of practice on inspections of premises and on the enforcement of food hazard warnings. I assure the House that we are considering a number of proposals to ensure that interim arrangements are in place to guarantee that we can, with confidence, recommend British food to British people.

Mr. Hogg: May put it to the Chancellor of the Duchy that if we are to have a food standards agency it is extremely important that a Minister is able to explain its decisions to the House? It would be unacceptable if we failed to have an accountable Minister responsible for its decisions.

Dr. Clark: Of course that is the case. As the right hon. and learned Gentleman knows, because he spoke on agriculture at the Dispatch Box, there was much disquiet about the Ministry's handling of food issues. We recognise his substantive point: the food standards agency will ultimately be responsible to the House and we believe that that is better achieved through a Minister at the Department of Health.

Special Advisers

Mr. Clifton-Brown: To ask the Chancellor of the Duchy of Lancaster what representations he has received about the use of special advisers. [4932]

Dr. David Clark: We have had very few responses on that issue.

Mr. Clifton-Brown: Does the fact that the Chancellor of the Duchy and his Administration have felt it necessary to increase the number of special advisers from 38 to 51 reflect the competence of the special advisers or the calibre of the Ministers whom they advise?

Dr. Clark: Simply neither. We made it clear that we would have two advisers per Cabinet Minister. We also made it clear that we would strengthen the policy unit at No. 10. There are many advantages in having strategic advice available to Ministers. If Conservative Members are not aware of that by now, given their election defeat, they will never learn.

Sir Patrick Cormack: To whom are the special advisers supposed to give advice? Does their remit extend to giving advice to the press and local councillors, or should they stick to giving advice to Ministers?

Dr. Clark: It is a pleasure to welcome the hon. Member for South Staffordshire (Sir P. Cormack) to the

Dispatch Box. I have known him for many years and am glad to see him take his rightful place. It is clear that the special advisers operate under exactly the same conditions as those under which they operated during the previous Administration, and that they are answerable to Ministers.

Senior Civil Servants

Mr. Sheerman: To ask the Chancellor of the Duchy of Lancaster what steps he is proposing to recruit senior civil servants from a broad educational background. [4933]

Mr. Kilfoyle: The Government will continue to ensure that selection for senior civil service posts is on merit, regardless of educational background. The merit principle applies equally to serving civil servants promoted to the senior civil service and, of course, to those recruited from elsewhere.

Mr. Sheerman: From my temporary perch on the edge of this Bench, may I ask my right hon. Friend to read the Civil Service Commission annual report? It is worrying that there has been a substantial drop in the number of people from ethnic minorities who have been recruited into the senior civil service, and that only 23 per cent. of those getting into the fast stream are women. Can we be content with the fact that senior civil service recruitment is entirely dominated by Oxbridge? Is it not time that the other hundred decent universities supplied a good share of senior civil servants?

Mr. Kilfoyle: There is a monitoring process to ensure that ethnic minorities and women are appropriately represented in the senior civil service. The numbers being recruited from Oxbridge fell from 44 per cent. to 36 per cent. in the three years from 1993–94 to 1995–96. The fast stream development programme is designed to ensure that recruitment is from the widest range possible of appropriate higher education institutions and other bodies.

Mr. Wilkinson: Is it not to the House that policy makers look for a broad educational background, very little, or in some cases almost none at all, but from the civil service Her Majesty's Government have the right to expect impartial advice of the highest quality? Is not the hon. Gentleman right to insist that civil servants should be recruited on merit, particularly in the upper ranks, and that there should be no question of reverse or any other kind of discrimination?

Mr. Kilfoyle: I am happy to agree with the hon. Gentleman: yes, I am quite right. Criteria are set down to ensure that the highest possible calibre of civil servants are recruited, and that is the Government's aim.

Citizens Charter

Mr. Barry Jones: To ask the Chancellor of the Duchy of Lancaster, pursuant to his oral answer to the hon. Member for the City of York (Mr. Bayley) of 4 June, Official Report, columns 378–79, how he proposes to take into account the views of the users of public services in future proposals relating to the citizens charter initiative. [4934]

Mr. Kilfoyle: We are about to begin a series of visits and forums around the country during which we aim to


meet as many users of public services as possible. To back that up, we are considering setting up a panel, among other things, drawn from all walks of life, to inform and guide future proposals on the charter. We shall be announcing the details of this in due course.

Mr. Jones: How will my hon. Friend consider the needs of those who are elderly and those with disability?

Mr. Kilfoyle: I am happy to tell my hon. Friend that I shall shortly be meeting a series of forums, including one next week for the elderly, to ascertain their views so that we can ensure that the Government reflect the views of people in all walks of life on the services that they require.

Food Safety

Mr. Heppell: To ask the Chancellor of the Duchy of Lancaster what discussions he has had with colleagues on issues relating to food safety. [4935]

Dr. David Clark: At the request of my right hon. Friend the Prime Minister, I chair the ministerial group on food safety. In this capacity, I co-ordinate departmental considerations of issues arising from the establishment of the food standards agency and other aspects of food safety.

Mr. Heppell: Can my right hon. Friend confirm what I believe that he was saying earlier—that responsibility for the food standards agency when it is set up will rest with the Secretary of State for Health—and can he tell us how it will report to the House?

Dr. Clark: It is envisaged that the food standards agency will be a body akin to the Health and Safety Commission which for the past 20 years has served health and safety in Britain very well. At the end of the day, it has been decided that the food standards agency should report to the House through a Department of Health Minister.

Mr. Paice: I welcome the fact that McDonald's now recognises that British beef is safe, but can the right hon. Gentleman tell the House of any action taken by his Government which means that British beef was any safer last week than it was on 1 May?

Dr. Clark: It stretches credulity a little for a member of the Conservative party to talk about the safety of British beef. That is the party which was supposed to go ahead with a cull of beef cattle to try to ensure that Britain's beef herd was safe. That is the party which promised that the European ban would be lifted when it was not. The Government will take no lecturing at all on the beef industry from Conservative Members.

Open Government

Mr. Ian Bruce: To ask the Chancellor of the Duchy of Lancaster what plans he has to provide public access to information terminals to allow communication with Government. [4937]

Dr. David Clark: A number of pilot projects using public access terminals have been set up around the

country. They provide information on a range of public services and local amenities. As I suspect that the hon. Gentleman knows, the purpose of the pilots is to test consumer acceptance of the terminals as service delivery mechanisms. We intend a number of similar projects to be distributed throughout the country during the coming year.

Mr. Bruce: I thank the right hon. Gentleman for that answer. Can he tell the House when citizens in my constituency, having heard the Budget speech, will be able to punch in their own details and find out how much money the Labour party intends to take out of their pockets?

Dr. Clark: The hon. Gentleman will have to wait a little while before even he knows the answer—if that is indeed the answer. In all seriousness, the hon. Gentleman has long taken an interest in the subject of his main question and, like me, he knows the implications and the impact that information technology will have on the delivery of Government information and Government services to individuals. He will be pleased to know that I have made arrangements for right hon. and hon. Members to view some of the access terminals and that a demonstration will be staged from 7 to 11 July in the Upper Waiting Hall.

Citizens Charter

Mr. Evans: To ask the Chancellor of the Duchy of Lancaster what recent representations he has received concerning the future of the citizens charter. [4938]

Mr. Kilfoyle: Two weeks ago, we met representatives from the National Consumer Council to talk about the new Government agenda, of which the charter is one part. We are also in discussion with a number of other interested organisations on the future of the charter programme. We also have the helpful report on the charter published in March by the Public Service Committee, on which the hon. Gentleman served.

Mr. Evans: As the Minister will know, the citizens charter was introduced by the Conservative Government to ensure that the level of public services was increased and that the taxpayer received a high level of public service. I know that he will not be able to assure the House that the Chancellor of the Exchequer will not introduce new taxes this afternoon—we shall not have to wait long to discover that—but can he assure us that the Labour Government will break the habit of a lifetime and that the British taxpayer will not end up paying more and receiving less?

Mr. Kilfoyle: One can take the boy out of shopkeeping, but one cannot take shopkeeping out of the boy. That may explain the hon. Gentleman's Poujadist view of what government ought to be about. As he knows, there are 41 national charters, 10,000 local charters and 645 recipients of the chartermark. We want to ensure that the whole movement is reinforced. That takes not money but will—a will that the Labour party has and the Conservative party before 1 May lacked.

Mr. Connarty: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the effectiveness of the citizens charter. [4939]

Mr. Kilfoyle: We believe that there is room for improvement, but that there is real potential in the


programme, and we intend to release it by involving ordinary people throughout the country in genuine consultation about how we can improve public services.

Mr. Connarty: I thank my hon. Friend for that answer. Does he accept that there is a real need to replace the previous Government's top-down approach to the citizens charter programme? What plans does my hon. Friend have to involve ordinary members of the public, who are the recipients of the services on a daily basis, in deciding what is an acceptable level of public service?

Mr. Kilfoyle: One of the ways in which we intend to involve ordinary people is demonstrated by the fact that we are considering setting up a people's panel, to involve many people throughout the country and find out what they expect of services both local and national. We have already mentioned that in the near future we shall be addressing forums of ordinary citizens from all over the country. In addition, we shall undertake trips to meet people in the provinces at various organisations.

Mr. Rowe: Given that virtually the only citizens in this country who are forced by law to attend a particular place are the children who have to go to school, will the hon. Gentleman consider extending the citizens charter to make it clear that schools are expected to deliver children's ability to read, write and figure?

Mr. Kilfoyle: The hon. Gentleman will be pleased to know that one of the forums that I shall soon be meeting will consist of young children, the future citizens of this country. Moreover, we have worked in partnership with the Citizenship Foundation to ensure that more than 4,000 schools that wished to do so received a pack relating directly to their interests.

Open Government

Mr. Amess: To ask the Chancellor of the Duchy of Lancaster what recent representations he has received about open government. [4940]

Dr. David Clark: My Department has received representations from more than 60 organisations and individuals, all welcoming the Government's plans for greater openness and a freedom of information Act.

Mr. Amess: Will the Minister explain to the House how the new Labour Government's professed belief in open government is compatible with the answer given by Ministers when asked a difficult question—that there will be a review?

Dr. Clark: During today's Question Time, I have not mentioned the word "review".

Mr. Pike: Will my right hon. Friend confirm that, for the first time for 18 years, we have a Government committed to open and accountable government—the exact opposite of the previous Tory Government?

Dr. Clark: I am afraid that I could not even attempt to add to the sensible words of my hon. Friend, who is absolutely correct. We now have a Government who

believe in openness, transparency and accountability, and we intend to rebuild the trust of the British people in their Government.

Oral Answers to Questions — PRIME MINISTER

Engagements

Dr. Lynne Jones: To ask the Prime Minister if he will list his official engagements for Wednesday 2 July. [4957]

The Prime Minister (Mr. Tony Blair): This morning, we had a Cabinet meeting to discuss the Budget. I had meetings with ministerial colleagues and others. In between, I am delighted to say that I was able to watch Mr. Tim Henman win magnificently at tennis.

Dr. Jones: Does my right hon. Friend agree with the CBI, chambers of commerce, a string of economists and even the Bank of England that tax increases and not rises in interest rates are needed if we are to convert the threatened consumer boom into sustained growth in a productive economy? Would not fair taxation changes in a generally upward direction be welcomed by the public, who want to see more spent on health and education?

The Prime Minister: My hon. Friend will have to wait for the Chancellor's statement a little later, but she is right to draw attention to the appalling state of the public finances left to us by the previous Government.

Mr. Hague: Will the Prime Minister tell the House who gave authority to the Treasury press office to confirm certain details of the Budget in advance of its presentation to Parliament?

The Prime Minister: I have to say to the right hon. Gentleman that, as far as I am aware, all Treasury officials have done is to confirm that we will do what we said we would do before the election. This may be a novel proposition for the Conservative party, but it is not for us.

Mr. Hague: Is the Prime Minister aware that on top of this morning's disclosure by the Treasury, the Financial Times quotes a senior member of the Government as confirming that changes to dividend tax credits will be included in the Budget—something which was not the previously stated policy of the Labour party and was not in its election manifesto? Is he aware that Hugh Dalton, the Labour Chancellor who resigned over a Budget leak—admittedly, he was old Labour and one could trust him—said that one must always own up? Who will own up for that particular leak? Will the Prime Minister mount an investigation into that leak and, in common with previous practice on Budget leaks, will it be a police investigation?

The Prime Minister: I have never heard anything quite so absurd as this.

Mr. Skinner: Hold a referendum.

The Prime Minister: My hon. Friend is right—why not hold a referendum? I say to the right hon. Gentleman that at least with this Government, the whole of the Budget was not leaked.

Mr. Hague: It is all very well for the Prime Minister to make light of the leaking of Budget details which affect


billions of pounds on the markets and the savings of millions of people. He should mount an investigation into the leak. If he does, will he make a better job of it than last week's investigation into the behaviour of the Secretary of State for Wales? When he gave us his assurance last week that an investigation had been carried out to his satisfaction, did he know that in the course of that investigation the hon. Member for Blaenau Gwent (Mr. Smith), who made the allegations, had not been contacted?

The Prime Minister: My advice to the right hon. Gentleman is to quit while he is behind. As for his going back to last week's Question Time, I think that he should stop flogging a dead horse.

Mr. Hague: My advice to the Prime Minister is to answer the question that he is paid to answer. My advice to the Prime Minister is that when there is incompetence in the Treasury, or when Budget details are leaked without authorisation, the buck stops there, with the First Lord of the Treasury.
Does it not worry the Prime Minister even a little that, after his personal assurances to the House last week, one of his own Members of Parliament said, "What the Prime Minister—I am sad to say—said is wrong"? Does the right hon. Gentleman agree that, if and when these matters are properly investigated—as they should be—the rules of conduct that he so publicly sets for others must apply to the Labour party, the Government and himself?

The Prime Minister: The right hon. Gentleman will have to wait for my right hon. Friend the Chancellor's statement, which will be made in a moment, but I can give him this assurance. We set out some clear promises in our manifesto, and we will maintain those promises: we will keep them. One of the great differences that people see between the Government and the Opposition is that when we make promises, we keep them.

Mr. Rammell: In the nine weeks since my election, I have received literally hundreds of letters from my constituents in Harlow about a wide range of issues; but I have yet to receive a single letter demanding a referendum on the outcome of the Amsterdam summit. Does my right hon. Friend agree with me—and, it seems, with the right hon. and learned Member for Rushcliffe (Mr. Clarke)—that there is no need for such referendums, and that they should not take place? [4958]

The Prime Minister: I thank my hon. Friend. I am rather surprised that the Leader of the Opposition did not raise that as his big point at Prime Minister's Question Time.
Apparently, the reason why some people say that there should be a referendum is the extension of qualified majority voting. I have looked carefully at both the Single European Act and the Maastricht treaty, and there are vastly greater extensions of qualified majority voting in both. Not one word about a referendum did we ever hear from Conservative Members—but then they are consistent at least in their inconsistency.

Mr. Tyler: In the light of the outcome of the Aitken affair, can the Prime Minister confirm that he is examining the role of the Cabinet Secretary—and, indeed,

the implications for the reputation of the civil service for impartiality—given the invidious role in which the Cabinet Secretary was put, apparently as a result of Government activity? [4959]

The Prime Minister: I cannot confirm that. What I can tell the hon. Gentleman is that any allegation will be properly investigated. Many of these matters, however, are currently in the hands of the various authorities that should investigate them, and it would not be right for me to comment on them, certainly at this stage.

Mr. Pickthall: My right hon. Friend will understand the concern of those living in areas bordering the northern parts of the Irish sea about the revelation of the secret dumping of radioactive material in the Beaufort Dyke. I commend the Minister of State, Ministry of Agriculture, Fisheries and Food, my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), for the speed with which he has made the information public, but will my right hon. Friend assure us that such secret dumping is not happening now, and cannot happen in the future? Does he agree that this is a fine example of the need for open government? [4960]

The Prime Minister: I can confirm that, contrary to assurances that were given in good faith by Conservative and Labour Governments, some radioactive material was, apparently, dumped at Beaufort Dyke in the 1950s. Our understanding and my advice is that it was of an extremely small nature and that it poses no risk either to human health or to the environment. We have received further information, and as it becomes available we will make it public, because we are concerned to ensure that anything that is alleged is brought out into the open so that people can know exactly what happened.

Sir Sydney Chapman: Can the Prime Minister inform the House as a matter of open government whether the impending so-called anti-sleaze Bill will contain a provision to make it an offence for a Member of Parliament to induce another Member of Parliament to give up his seat in return for a peerage?

The Prime Minister: I can assure the hon. Gentleman that, in contradistinction to the previous Government, we shall uphold the highest standards in public life.

Mr. Berry: Will my right hon. Friend acknowledge the warm welcome given by disabled people to the Government's pledge to introduce comprehensive and enforceable civil rights legislation, and not least by the 1,000 or so people who lobbied Parliament yesterday? What action is being taken to implement that manifesto commitment? [4961]

The Prime Minister: First, I congratulate my hon. Friend on all the work that he has done for disabled people. We are currently considering his Disability Rights Commission Bill. Our discussions with employment Ministers and disability organisations are continuing, and I am sure that they will result in the fulfilment of our manifesto pledge. It is worth pointing out that advances that have been made in the field of disability have always


been criticised at the time and have always ended up benefiting the vast majority of people in the country, disabled or not.

Mr. Ashdown: Earlier, the Prime Minister told us that when he had made promises he would keep them. At the general election, he made two promises: that the Government would cut taxes, and that they would improve public services. Does he believe that he can keep both?

The Prime Minister: I suggest that the right hon. Gentleman waits for the Budget statement that is about to be made.

Mr. Ashdown: Let me be more specific: one of the Prime Minister's key pledges—I think that they were called sacred pledges—was to cut class sizes, but the Government are forcing local authorities to continue to sack teachers. How is it possible to cut class sizes and to kick out teachers at the same time?

The Prime Minister: As the right hon. Gentleman knows, we are committed to cutting class sizes for five, six and seven-year-olds to 30 or fewer. We are committed to that, and we will do it. That is to be funded by phasing out the assisted places scheme. That Bill is on its way through the House of Commons now. We said that we would do that, and we will do it. If we do not, the right hon. Gentleman can come back and tackle us on it.

Mr. Soley: Following the successful transfer of sovereignty in Hong Kong, does my right hon. Friend agree that we have a genuine opportunity, over the period for which the Anglo-Chinese agreement continues, not only to exercise our rights and duties in respect of the freedoms of the people of Hong Kong but to build a much more productive and positive relationship with the people and Government of China, with a two-way exchange to the benefit of the people of both countries? [4962]

The Prime Minister: I agree with my hon. Friend. It is important to realise that the basis of a strong and stable relationship with China, which we want, is adherence to the joint declaration. That is the basis of the freedoms of the people in Hong Kong and we will expect it to be adhered to. In particular, it is important to put the elections that should be held within the year in the context of that joint declaration.
It is also the case that, through the joint liaison group between Britain and China, which will exist up to 2000, and with our continuing commitment for 50 years under the joint declaration, we shall have a continuing interest in Hong Kong. It is in the interests of Britain, China and the people of Hong Kong that we make sure that the joint declaration is kept to strictly—which we will—and that we build upon that a strong and good relationship with China for the future; we will do that, too.

Sir Peter Tapsell: Does the Prime Minister understand that his attempt to trivialise allegations of a Budget leak can only be damaging to his reputation, especially in view of his many statements that he would aim, as we all hope that he will, for the maintenance of the highest possible standards in public life? Is he aware that the alleged statements by Ministers, which were circulating as

rumours throughout the City for the whole of yesterday, resulted in the largest rise in the FTSE index for five years? This is a very serious matter. [Interruption.] Hon. Members opposite are always attacking the fat cats so it is rather extraordinary that they are so much in favour of them now when they are getting their cream from Labour ministerial leaks.

The Prime Minister: To my certain knowledge, I have sat through 14 Budgets of the previous Conservative Government, and some of my hon. Friends have sat through 18. There is Budget speculation every year. It happens all the time; it happened under the previous Conservative Government and I do not doubt that it will happen for ever. It is simply a matter of the way it goes. As for the leaks about which the Conservative Opposition are complaining today, those are things that we said that we would do in our manifesto and intend doing.

Mr. Healey: Is the Prime Minister aware that the legacy of the previous Government has left the Rotherham area with the highest unemployment rate of anywhere in the Yorkshire and Humberside region? Nearly one in three of our unemployed are under 25. Will he therefore spell out what guarantees he can offer to the young people of Rotherham and Dearne that their job prospects will improve under the current Government? [4963]

The Prime Minister: I thank my hon. Friend for that question. No doubt if I mention the windfall tax I will be accused of leaking the Budget, but that measure was set out clearly in our election manifesto. The purpose of it is to give a chance to young people in my hon. Friend's area, my constituency and many other parts of the country who do not have hope and opportunity, or the possibility of getting a job or decent skills. They will get that chance for themselves because it is right that they should have the chance to do well for themselves and on behalf of the country, because the whole country benefits from a fairer, more decent and more civilised society.

Rev. Martin Smyth: Does the Prime Minister agree with me that threats from the Provisional IRA or loyalist Protestant volunteer forces are neither wanted nor helpful at this time? Does he also agree that there is something wrong when, although civil servants were aware of an aide-memoire response from Sinn Fein, the Secretary of State for Northern Ireland was, apparently, not informed? Surely in open government civil servants should advise Ministers accurately.

The Prime Minister: I am not entirely sure that I understood one part of the hon. Gentleman's question and forgive me if I did not. I will write to him if there is any misunderstanding.
The aide-memoire was passed by the Government to Sinn Fein in the circumstances that I explained last week. I entirely agree with the hon. Gentleman about the case against threats or intimidation to the process. We will resist them now, and if the set of circumstances ever comes about in which there are all-inclusive talks, we will resist them then as well. What we want to see is a lasting political settlement, but the only people who have the right to play any part in that are those who are giving up violence, not those who are following it.

Mr. Jim Cunningham: Does my right hon. Friend agree that when crime is committed in the community we


all become victims of it? Can he therefore say what the Government intend to do to protect the victims of crime? [4964]

The Prime Minister: I can tell my hon. Friend that, tomorrow, the Home Secretary will announce a series of measures that will improve the treatment of victims within our court system. In particular, they will try to deal with the intimidation of victims and witnesses, which is an extremely serious problem. I can assure my hon. Friend that crime is an issue which is raised with us continually and we will act upon it.

Mr. Wigley: Is the Prime Minister aware that in Wales, and no doubt elsewhere, health trusts and health authorities are teetering on the verge of bankruptcy because of a lack of funds? Because of underfunding by the previous Government, nurses are being sacked; beds are being closed; and commitments on community hospitals are not being fulfilled. Will he give an assurance that his Government will provide adequate resources to ensure that in the coming winter no one goes without a bed in hospital if in need? [4965]

The Prime Minister: We shall do our very best to ensure that that happens. I have to say two things. First, it is important that any money that we spend on the national health service goes into patient care, which is why we are committed to ending the Conservative internal market and making sure that that money goes to patients rather than bureaucrats and administrators. Secondly, it is extremely important that we take all the steps necessary to make sure that the national health service is available for people on the basis of need, not ability to pay. I assure the hon. Gentleman that those two principles will underwrite everything that we do.

Ms Hewitt: Does my right hon. Friend agree, without tempting him into any Budget leaks, that millions of families who have been struggling to pay more than 20 tax rises imposed on them by the previous Government will be hoping in this afternoon's Budget for a cut in the rate of VAT on fuel and for a commitment to reduce, and not raise, tax rates for ordinary working families?

The Prime Minister: I can certainly say, without in any way entering into Budget discussions, that we will adhere to our promises. Those promises include cutting VAT on fuel. When the last Government introduced that it caused enormous distress to ordinary families throughout the country, and especially to pensioners, who ended up bearing the brunt of it.

Mr. Willetts: Can the Prime Minister confirm that he supports the principle of independent taxation of husband and wife? Would it not be inconceivable to go back to the days when the incomes of husband and wife were taxed jointly? Will he therefore assure the House that nothing in the Government's review of integrating tax and benefits will undermine that principle? [4966]

The Prime Minister: As I have said to other hon. Members, I am not getting tempted into anything that

might happen later this afternoon. We set out our principles on taxation clearly in our manifesto and we will keep to them.

Mr. Corbett: Can the Prime Minister confirm that his Government attach high importance to giving every possible assistance to helping the two Cypriot communities reach agreement on a federal bi-zonal solution to what has unhappily been known for the past 25 years as the Cyprus problem?

The Prime Minister: Yes. I can confirm that we remain committed to that. We will have the European Union presidency in the first part of next year. As I said to the House a week ago, we are committed to using the presidency to find the long-term solution to the problem of Cyprus that everyone wishes to see.

Mr. Rendel: Given that the money from the cancellation of the assisted places scheme cannot become available to the Government for at least another year, and that many local education authorities are already threatening to sack teachers this year—Labour-run Bury, for example, is threatening to sack 167—does the Prime Minister admit that teacher-pupil ratios will continue to get worse and that the number of primary school children in classes of more than 30 will continue to grow for at least another year? [4967]

The Prime Minister: What I can confirm is that tremendous problems have been left to us. We have to deal with those problems as we can, making progress in the way that we are able to, given the difficulties of public finances and all the rest that we have inherited. In this matter, as in others, people expect us to make progress as we are able. If we had the support of all parties in the House to get through the measures that we need to get rid of the assisted places scheme and put in place the funding of lower class sizes, we would be able to make swifter progress. We will do all that we can consistent with the proper management of the nation's finances. If I may say so, that is the difference between government and opposition.

Ayrshire (Visit)

Mr. Donohoe: To ask the Prime Minister when he next expects to visit Ayrshire. [4968]

The Prime Minister: I have no immediate plans to visit Ayrshire, but I have done so many times in the past and no doubt will do so again.

Mr. Donohoe: That is a great shame because Ayrshire is such a beautiful county. My right hon. Friend does not know what he is missing. I am sure that we will he able to entice him to the wonderful Ayrshire coast—the Clyde coast—in the not-too-distant future. More seriously, if he were to come he would learn that there is a tremendously high level of drug taking in Ayrshire. Local health board estimates suggest that 30,000 people have at some point taken drugs. Knowing of his commitment before the general election to set up a task force, what progress has been made by him and by my right hon. Friend the Home Secretary?

The Prime Minister: The proposal that we made during the course of the election to appoint one person—


the so-called drugs tsar—to be in charge of all aspects of our policy, will be put into effect shortly. We are concerned to move quickly on the problem, not merely because of the effects that my hon. Friend has mentioned in relation to his constituency and others, but because of the absolute, hard and overwhelming evidence of the link between drug abuse and crime. That is why we are going to introduce measures, not merely to crack down on drug abuse and those taking and peddling drugs, but to tackle some of the underlying causes of crime such as youth unemployment.

Mr. Alasdair Morgan: My question relates to Ayrshire, particularly the Ayrshire coast and the coast of the south-west of Scotland. Can we expect an early statement on the problems of the munitions in Beaufort Dyke, particularly the revelations about radioactive waste being dumped there?

The Prime Minister: We have made available such evidence as exists. The reason why the subject is being discussed today at Prime Minister's questions is precisely because when it came to light that, contrary to previous Government assurances, which were made in good faith, radioactive material had been dumped, we disclosed that fact. That is why we are discussing the matter now; if further information comes to light, we shall disclose that. I repeat, because it is important that people should not become unnecessarily alarmed, that the advice that I have been given is that the dumping was of a low level and that there is no risk to human health or the environment. If any further evidence, or anything that may change or mitigate that statement, comes to light, we shall make the information available to the House.

Engagements

Mr. McAllion: At the United Nations summit on social development in 1995 it was agreed that each participating Government should draw up a national plan for the eradication of poverty. Is my right hon. Friend aware that the last Tory Government subsequently ratted on that commitment, claiming that such a plan was not needed in this country? Does my right hon. Friend agree that that represents a calculated insult to the many millions of our fellow citizens who live in poverty or on the margins of poverty? Will he put that wrong right by committing this Labour Government to drawing up a national plan within an agreed time scale? [4969]

The Prime Minister: This Government certainly regard the eradication of poverty as one of their aims and objectives. That is why we want the windfall tax to reduce youth unemployment, why we believe in cutting VAT on fuel and why we are now looking into how the benefits

system, particularly the interrelationship between the tax and benefit system, can be improved so that it gives people incentives to get back to work. It is also why we are looking across a range of issues in relation to the welfare state to see how we can make the provision fairer, more effective and more modern.

Mr. Tom King: Is the Prime Minister aware that he has given the clearest impression to the House today that he does not regard the leaks that have been discussed as very serious? Is he aware that there is prima facie evidence that a number of people have made a substantial amount of money by relying on the stories or attributions that have allegedly come from members of the Government? This is a serious matter as it goes to the heart of the integrity of Government. Has he taken senior advice on this matter, which seems to many of us to be a very serious issue for his Government?

The Prime Minister: Speculation about what is in the Budget occurs every year to my certain knowledge. [Interruption.] Yes it does. If the right hon. Gentleman wants to go back, as I have done, and check last year's press cuttings from the Conservative Budget he will find that they were all over the place—they involved senior Government sources and other sources. What is happening is merely the usual round of speculation. The Conservative party is tackling this issue because it is afraid of tackling the real issues.

Mr. Skinner: Is my right hon. Friend aware that as a result of the massive pit closure programme of the past 18 years and, particularly, the past few years, there is not a single pit left in the Derbyshire coalfields—and the same applies to many other coalfields? Will he take into account the fact that there has not been any overheating of the economy in any of those coalfield areas? When he is drawing up plans arising from the Budget or afterwards, will he hear in mind the fact that, whatever improvement takes place generally, some sort of an industrial development plan is needed for those coalfield areas, where poverty and mass unemployment still reign supreme as a result of the past 18 years?

The Prime Minister: I think that my hon. Friend is absolutely right in what he says. That is why it is important—whatever the general state of economy—that we take specific and targeted measures on unemployment that take account of the fact that, for those areas that have engaged in huge industrial restructuring, there must be specific help for people there. It is also one of the reasons why we are committed to development agencies in the regions that can co-ordinate inward investment and the development of small, medium, starting-up and other businesses coming in to supplant those that have gone. That type of specific, targeted activity is a very important part of our economic and industrial policy.

Budget Statement (Advance Disclosure)

Mr. Peter Lilley: (by private notice): To ask the President of the Council and Leader of the House of Commons if she will move to set up a Select Committee to investigate advance disclosure of the Chancellor of the Exchequer's Budget statement. [Interruption.]

Madam Speaker: Order. I will take no points of order until after the private notice question. I want to hear what the right hon. Gentleman has to say at the Dispatch Box. The House will come to order and hear exchanges. Mr. Lilley.

Mr. Lilley: indicated dissent.

Madam Speaker: In that case, we will have silence for Mrs. Taylor.

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): No, we do not intend to establish such a Committee. There is always speculation at the time of the Budget about its contents, as the right hon. Gentleman, a former junior Treasury Minister, should know. I have seen no evidence that details of the Budget statement have been leaked. If the complaints are that we are sticking to manifesto commitments and election pledges, then, as the Prime Minister made clear, we are happy to confirm that this is the case.

Mr. Lilley: I had rather hoped that the right hon. Lady, recognising that she acts for the whole House rather than for the Government, would take this matter more seriously—certainly more seriously than her right hon. Friend the Prime Minister—act on precedent and set up an inquiry. Does she not recognise that these are matters of the highest importance to the authority of the House and to the integrity of financial markets? That is why a previous Labour Chancellor, who himself disclosed contents of his own Budget before that Budget, was required to resign and the same has happened to other Treasury Ministers.
The right hon. Lady says that this relates to matters that were in the Labour party's manifesto. Neither of the issues disclosed before the Budget today was in the Labour party's manifesto. They are not a matter of speculation, but of disclosure of specific matters which will be in the Budget. If she says that it was a matter of which we all should be aware, why was it that, when the Treasury revealed the details of the plans to abolish in this Budget the tax relief for medical insurance for the elderly, the BBC thought that was news, Ceefax thought that was news and the journalists who phoned me thought that was news? They did not think that it was established policy and, unlike the Treasury which said that it was in the manifesto, they knew that it was not in the Labour party manifesto. It had never been declared as policy and a possible content of this Budget in the House, and I would submit to the right hon. Lady that it should not have been revealed to journalists before it was disclosed in the Budget statement in the House.
Whatever the right hon. Lady may say about that issue, she will surely agree that the second disclosure, on the front page of the Financial Times today, written by its respected political correspondent, states:
A senior member of the government said"—
about the plans to abolish dividend tax credits and take billions of pounds out of pension funds—
the markets are bonkers … we are pressing ahead
with these plans. That is a clear disclosure of a very price-sensitive matter. Will the right hon. Lady agree that it is necessary to inquire into the fact that there have been share price movements following both disclosures?
Does the right hon. Lady recall that when an official, without authorisation, leaked the contents of the Budget last year, the then shadow Chancellor—now the Chancellor—said:
I condemn this leak and I think nobody can condone the leak of sensitive Budget matters the day before the Budget. I am sure that a full inquiry is going to be mounted"?
Why is no inquiry to be mounted on this occasion? Why is no Select Committee to be set up, even though one was in the Hugh Dalton case? Does the right hon. Lady agree with the former Labour Prime Minister, Attlee, who said:
The principle of the inviolability of the Budget is of the highest importance, and the discretion of the Chancellor of the Exchequer must he beyond question"?
Does she agree with Hugh Dalton's reaction when he was urged not to admit that he was the Minister responsible? Does she accept that whichever Treasury Minister briefed The Times and was quoted by the Financial Times must own up and say that he did it? Finally, does she agree that there must be an inquiry to clear up these matters before we can proceed?

Mrs. Taylor: I think that the right hon. Gentleman has confirmed our fears that this is nothing more than a pathetic attempt to disrupt the Budget, because the Opposition are so afraid of the popularity of our manifesto commitments. The right hon. Gentleman really ought to learn the difference between speculation and disclosure. As my right hon. Friend the Prime Minister has said, speculation of the type that appears in the Financial Times today has preceded every other Budget, too.
As for the abolition of tax relief on medical insurance, which the right hon. Gentleman claims has been revealed to the world for the first time today, I remind him and his colleagues that on 25 February 1997 the Conservative party published an attack on Labour's plans which included the words:
Labour are committed to cutting VAT on fuel to 5 per cent. Labour have said that they will pay for this by abolishing tax relief on medical insurance for pensioners.
I can confirm to the House that the purpose of Budget secrecy is to prevent sensitive material from being leaked, not to prevent manifesto commitments from being kept.

Mr. Robert Sheldon: Budget day would not be—

Hon. Members: Call Kenneth Clarke!

Madam Speaker: Order. A right hon. Gentleman is on his feet.

Mr. Sheldon: Budget day would not be the same if there were not rumours and guesses about the contents of


the Budget. The only quotation in the Financial Times states that a senior Minister has said, "We are pressing ahead." That is what we are doing—pressing ahead.

Mrs. Taylor: I think that my right hon. Friend will shortly find out that that is the case.

Mr. Paul Tyler: May I add to the quotation that has been read? It also said:
A senior member of the government said: 'The markets are bonkers"'.
Is that not true, Madam Speaker?
May I make a constructive suggestion? I wonder whether the Leader of the House heard her colleague, the Chancellor of the Duchy of Lancaster, responding to a point made by my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) about the advantages of open government in relation to the budgetary process.
If, among Government steps to improve the position, we had more public discussion, before the Budget, of the fiscal options, so that such speculation as took place took account of that discussion and had that as background, and if, as part of the plans for open government, the Government would now give us an undertaking that those strategic options and fiscal opportunities would be discussed in the open, without the Chancellor disappearing into purdah for so many weeks, we would have a much healthier democratic discussion than we do at the moment.

Mrs. Taylor: I really think that we cannot have it both ways. We cannot have complaints that there has not been enough secrecy and, at the same time, complaints that there has been too much.

Mr. Gerald Kaufman: Madam Speaker, this morning you rebuked one of the minority parties for playing childish games. Will you now rebuke another of the minority parties for playing childish games, and point out that that type of childish game, which the electorate are sick of, explains why that party is on the Opposition Benches and why, after the next general election, it will be on the Opposition Benches below the Gangway?

Mr. William Cash: As the Leader of the House has said that this is a matter for speculation, as has the Prime Minister, does she accept that there are strong grounds, as there were in 1947, for a stock exchange investigation to establish whether there is a connection between the soaring market prices yesterday and the allegations that have been made? Will she say whether she thinks that there should be a stock exchange investigation, and would she object if there were one?

Mrs. Taylor: No. I see no reason for one.

Mr. Dale Campbell-Savours: May I say to my right hon. Friend that I have a copy of the Financial Times article, and it is clear that not one single word in that article could be construed as a Budget leak, not even in the wildest possible circumstances of

imagination? Is not the reality that all we have here is a publicity stunt by the Tories, and that the country will not be fooled?

Mrs. Taylor: My hon. Friend is right. The country will not be fooled, and I think that the country is looking forward to hearing the Chancellor of the Exchequer's Budget statement.

Mr. Bernard Jenkin: Will the right hon. Lady, in the interests of her manifesto commitments in favour of open government and the highest standards in public life, therefore be happy to name the senior member of the Government who is mentioned in the article? Why will she not tell us—or is she ashamed of it?

Mrs. Taylor: The hon. Gentleman is talking about speculation in the newspapers, which takes place on every occasion.

Audrey Wise: Does my right hon. Friend agree that it is by no means unusual for share prices to move on the basis of unfounded rumour? Will she, therefore, agree that this exposes the thinness of the Opposition's likely response to our right hon. Friend's Budget statement when he is finally allowed to make it? Does she share my impatience for us to get on with it?

Mrs. Taylor: Yes.

Mr. Alex Salmond: As I remember it, the Conservatives got quite upset when their Budget statements were delayed in one year or another. Given that many other countries have much fuller discussion and debate in the run-up to the Budget, is there not a case for far more discussion, not less? Should we not demystify the rigmarole and flummery of the Budget, and would that not be more important than the Chancellor's changing his jacket or his Budget box?

Mrs. Taylor: My right hon. Friend the Chancellor has made his priorities clear, which is why he is anxious to make his statement to the House.

Mr. Dennis Skinner: Does my right hon. Friend recall that, only last year, a Budget leak was sent to the Daily Mirror? For some obscure reason that I shall never understand, the Daily Mirror decided not to print it. But The Sun took the story and printed it. I did not hear a single word or a squeak from any Tory Member in support of a Select Committee and, what is more, we did not get a statement about it either.

Mrs. Taylor: My hon. Friend is right. Opposition Members have slipped into opposition mode very easily.

Mr. Douglas Hogg: Does the Leader of the House—[Interruption.]

Madam Speaker: Order.

Mr. Hogg: Does the Leader of the House accept—[Interruption.]

Madam Speaker: Order. The House will come to order and hear the right hon. and learned Gentleman.

Mr. Hogg: Does the Leader of the House accept that the House has a right to know the Government's position?


Is she saying that there was no leak or that there was a leak, but it does not matter? We are entitled to know. Moreover, does she accept that, in view of the lamentable way in which last week's inquiry into the allegations against the Secretary of State for Wales was conducted, the proper way, in accordance with precedent, is to set up an inquiry under the Tribunals and Inquiries Act 1971?

Mrs. Taylor: The right hon. and learned Gentleman should have been listening to what I said earlier. I said

that I have seen no evidence that any details of the Budget statement have been leaked. He says that he wants to know what we stand for. We went through the election campaign saying what would be in our first Budget. We shall find out soon to what extent we have kept our word.

Several hon. Members: rose—

Madam Speaker: Order. We shall now move on to the Budget.

WAYS AND MEANS

Budget Statement

Mr. Deputy Speaker (Sir Alan Haselhurst): Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that, at the end of the Chancellor's statement, copies of the Budget resolutions will be available in the Vote Office.

The Chancellor of the Exchequer (Mr. Gordon Brown): The Budget that I lay before the House today represents more than simply an allocation of resources and an accounting of revenues. Behind the numbers and statistics, the central purpose of the Budget is to ensure that Britain is equipped to rise to the challenge of the new and fast-changing global economy—not just a few of us, but every one of us.
The impact of the global market in goods and services, and of rapidly advancing technology, is now being felt in every home and community in our country. New products, services and opportunities challenge us to change; old skills, jobs and industries have gone and will never return. Yet for our country, the first industrial nation, this new global economy, driven by skills, creativity and adaptability, offers an historic opportunity. The dynamic economies of the future will be those that unlock the talent of all their people, and our nation's creativity, adaptability and belief in hard work and self-improvement—the very qualities that made Britain lead the world in the 18th and 19th centuries—are precisely the qualities that we need to make Britain a strong economic power in the 21st century.
To achieve that, however, we must address the four weaknesses that have held us back for too long and for too many years: instability; under-investment; unemployment; and waste of talent. In this Budget, I shall address each of those weaknesses in turn, to ensure stability, investment, work and opportunity for all.
I turn first to stability, because without stability all plans for investment, employment and education founder. In a global economy, long-term investment will come to those countries that demonstrate stability in their monetary and fiscal policies and in their trading relationships, and for Britain that means a commitment to stability in our relationships with Europe.
In May, the Government established a wholly new framework for monetary stability—open and accountable, based on clearly established rules and discipline, the Government setting the inflation target, and the Bank of England setting interest rates to meet that target. That reform signified our determination to break from the short-termism of the past and to establish long-term confidence. In this Budget, I shall match those measures for long-term monetary stability with measures to promote long-term fiscal stability.
The Chancellor is first and foremost the guardian of the public finances—the people's money. During the 1990s, however, the national debt has doubled. This year alone, the taxpayer will pay out debt interest payments of £25 billion—more on debt than we spend on schools.
Public finances must be sustainable over the long term. If they are not, the poor, the elderly and those on fixed incomes who depend most on public services will suffer

most. Therefore, as with our approach to monetary policy, so in fiscal policy: we will now establish clear rules, a new discipline, openness and accountability.
My first rule—the golden rule—ensures that over the economic cycle the Government will borrow only to invest, and that current spending will be met from taxation. My second rule is that, as a proportion of national income, public debt will be held at a prudent and stable level over the economic cycle. To implement those rules, I am announcing today a five-year deficit reduction plan. Those rules and that plan will ensure an historic break from the short-termism and expediency that have characterised the recent fiscal policies of our country.
As with our monetary policy, our fiscal policy will be all the more credible for being open and accountable. Immediately on coming to office, the Government invited independent scrutiny by the National Audit Office of key assumptions in the public finance forecasts. That independent scrutiny will continue into future Budgets, with further work by the National Audit Office, and with publication, some months in advance of every Budget, of an assessment for open debate in the country of what is happening to the economy and to the people's money.
My Budget today sets out a forecast for public borrowing this year and next, and for the following three years, projections for the public finances based on different scenarios for the growth of public spending. I can report that in each and every case, our deficit reduction plan ensures that we are on course to meet the two fiscal rules that will guide our approach to the public finances.
Any Budget seeking to achieve high and stable levels of growth and employment must be guided by the true state of the public finances, and also by a clear assessment of the state of the economy. I now turn to that.
We have seen a rapid growth of consumer spending of nearly 4 per cent. over the past year. With the prospect of further windfalls from the building societies, consumer spending is likely to remain strong.
There has been a sharp rise of 7 to 11 per cent. in house prices, with even higher rises in the south-east. The growth of average earnings has accelerated to 4½ per cent. a year. The rate of broad money growth has been around 10 per cent. for a year. Those increases in consumer spending, earnings and money supply are continuing even as industrial production and manufacturing output have been recovering only slowly. It is essential that consumer spending is underpinned by investment and industrial growth.
Britain cannot afford a recurrence of the all-too-familiar pattern of previous recoveries: accelerating consumer spending and borrowing side by side with skills shortages, capacity constraints, increased imports and rising inflation.
Already, there are warning signs that the pattern could be repeated. In similar circumstances, some of my predecessors have ignored the signs, while others have deluded themselves into believing that growth, however unbalanced, was evidence of their success. I will not ignore the warning signs and I will not repeat past mistakes.
The Treasury's assessment is that the output gap is close to zero, and there is a risk that output could already be above trend. In other words, our sustainable rate of


growth is too low for growth to continue at its current pace without the risk of more inflation. That is why in May I judged that interest rate increases were necessary, and events since then have confirmed that it was the correct judgment. But against these pressures, we must take into account both the subdued level of producer-price inflation and the current strength of sterling, which, over the past year, has appreciated by 18 per cent. I understand and share the concerns of industry and exporters and will address them.
As the figures demonstrate, there is now an imbalance between strong growth in the consumer and service sector and weak growth in the manufacturing and exporting sector. Nevertheless, what worries manufacturers even more is that inflation could get out of control and herald a return to the instability of stop-go.
My goal, therefore, is to ease inflationary pressures without damage to industrial and exporting prospects and to do so in a way that is consistent with our long-term objective of high and stable growth and employment. In this way, we can moderate the upward pressure on interest rates and on the exchange rate as well as further our objective of sustainable public finances.
I have therefore decided to tighten fiscal policy, as a result of Budget measures including the windfall tax, by £5½ billion this year and £4¾ billion next year and, with the resulting reductions in the deficit, I am able to present an economic forecast putting us back on course for a more balanced and more lasting recovery and for long-term stability in the public finances.
The forecast is that national income will grow by 3¼ per cent. this year and 2½ per cent. next year before returning to its trend rate.
Consumer spending, which is expected to increase by 4½ per cent. this year, is forecast to grow more slowly at 4 per cent. next year.
Business investment, which has failed to meet expectations over the past two years, is forecast to rise strongly this year and next, so increasing investment as a share of our national income.
Finally, inflation is expected to remain at 2½ per cent. this year, the Government's target, rising slightly to 2¾ per cent. next year as a result of the failure by the previous Government to take early action to control inflation, before returning to 2½ per cent in 1999.
To achieve long-term stability is to achieve something no Government have done for decades. But stability is a necessary, not a sufficient, condition for the Government's objective of high and stable levels of growth and employment.
A prudent estimate of the current trend rate of growth is only 2¼ per cent., so raising the long-term growth rate of our economy is our major challenge. That is why the announcements that follow represent a new kind of Budget for higher growth—one whose main priorities are to invest for the long term, particularly in skills, to modernise the welfare state and to maximise opportunity for all—the modern route to economic success.
While previous Budgets used to be about dividing up today's wealth, this and future Budgets will thus concentrate on laying the foundations for tomorrow's wealth, and it is to far-reaching measures that will raise the quantity and quality of investment that I now turn.
Since 1980, the United Kingdom has invested a lower share of national income than most other industrialised countries, and national income per worker has been lower, too. For every £100 invested per worker in the United Kingdom, Germany has invested more than £140, the United States and France around £150, and Japan more than £160 per worker.
The objective behind our two-year-long corporate tax review—begun in opposition—has been to develop a tax system that encourages personal savings, favours higher levels of investment, rewards long-term investment and is fair to all. Our consultations on capital gains tax will be completed in time for the next Budget.
Half the adult population of our country hardly saves at all. So, in order to encourage personal savings, the Government will, as promised, introduce from 1999 individual savings accounts, extending the principle of TESSAs and PEPs and continuing to offer favourable tax reliefs for saving. Through the new individual savings account, we intend to encourage the habit of saving among people who have never saved before. I can confirm also that this Budget will not proceed with the previous Government's proposal to phase out tax relief on employee pension contributions.
This point in the recovery is, however, the right time to make changes in corporation tax to encourage more long-term investment. My changes in monetary policy were designed to help companies make long-term investment decisions with confidence. The changes in corporation tax are directed to the same long-term objective.
I want the United Kingdom to be the obvious first choice for new investment, so I have decided to cut the main rate of corporation tax by 2 per cent., from 33 per cent. to 31 per cent., the lowest ever rate in the United Kingdom. This means that we shall have the lowest corporation tax rate of any of our major competitors—Germany, France, America or Japan—and we shall have it under a Labour Government. This is a long-term commitment which will increase both inward investment and domestic investment to the benefit of the whole country.
Too often, British companies have invested too little and too late in the economic cycle. Because I want companies to get the benefit now, the 2 per cent. corporation tax cut will apply from April 1997. This tax cut is the first component of this Budget's investment strategy. The second is a structural reform that will also encourage investment.
The present system of tax credits encourages companies to pay out dividends rather than reinvest their profits. That cannot be the best way of encouraging investment for the long term, as was acknowledged by the previous Government. Many pension funds are in substantial surplus and at present many companies are enjoying pension holidays, so this is the right time to undertake a long-needed reform. The previous Government cut tax credits paid to funds and companies, so with immediate effect I propose to abolish tax credits paid to pension funds and companies.
In all the consequential changes I will make, I have been, and I will be, fair. For PEP holders, for individuals who do not pay tax and for charities, tax credits will continue to be paid until April 1999. By that time, the introduction of the individual savings accounts will ensure


that individuals have the opportunity to continue to be able to save with tax advantages. So they will continue to have favourable tax incentives to invest in equities. Basic and lower-rate taxpayers do not pay any extra tax on dividends that they receive and that will remain the position, and we shall ensure that higher-rate taxpayers will pay no more than they do now on their dividends.
Advance corporation tax will continue to be paid by companies on their dividends at the same rate as now. To stop the yield from ACT being eroded by greater use of foreign income dividends, we are ending the foreign income dividends scheme from 6 April 1999. International holding companies will continue to pay dividends out of foreign income without paying advance corporation tax.
I shall make special provision for charities through public expenditure. Tax credits will be paid to them until April 1999, and after April 1999 the Government will fund a five-year transitional period. So charities will have seven years in total in which to adjust to the change.
For some time, charities have been pressing for a review of their tax treatment. The Government will now consult widely on how the tax treatment of charities can be made more appropriate to help charities today. Charities, too, will gain, like others, from the longer-term benefit to their shareholdings that higher company investment and profits will bring.
In future, new jobs are more likely to come from a large number of small businesses than from a small number of large businesses. The route to success is not for the Government to try to pick winners, but to create an environment in which more firms have more chances, by their own efforts, to succeed. That is why I have decided to do more to assist investment in small businesses. I have decided to cut the small companies tax rate by 2 per cent., from 23 per cent. to 21 per cent, and to do so from April 1997.
In the past, investment incentives were introduced during recessions, when companies are least able to consider new investment. At this point in the economic cycle, an investment incentive should encourage companies considering future investments to bring those investments forward. I have, therefore, decided, with immediate effect, to double for one year the level of first-year capital allowances on plant and machinery for small and medium-sized firms. That will apply to both companies and unincorporated businesses. It means that if a firm invests within the next 12 months, it will be able to set off against tax not a quarter of its investment as hitherto, but a half.
More than 3½ million businesses will be eligible for that relief. It will be worth £230 million to small and medium-sized businesses next year, and £170 million the year after. It will be largely paid for by reinstating the one year carry-back time for corporate losses, which was temporarily extended to three years during the recession.
Taken together, the cut in corporation tax and the new investment incentive represent a significant boost for small business investment. Britain now moves forward with one of the most favourable tax regimes for small businesses of any country. This Government will support the small businesses of Britain.
Britain is increasingly leading the world in those industries that most obviously depend on the skills and talents of their workers, such as communications, design,

architecture, fashion, music and film. Our national endowment fund for science, technology and the arts will offer talented young artists and scientists the finance to turn British ideas into successful business ventures. But despite our film industry's outstanding record of creative and critical success, too many British films that could be made in Britain are being made abroad, or not at all.
The talents of British film makers can and should, wherever possible, be employed to the benefit of the British economy. So, after today, production and acquisition costs on British films with budgets of £15 million or less will qualify for 100 per cent. write-off for tax purposes when the film is completed. That is a three-year measure at a cost of £30 million, and it should boost not only the number of British films, but the British economy by increasing our exports.
In the new economy, in which capital, inventions and even raw materials are mobile, Britain has only one truly national resource: the talent and potential of its people. Yet in Britain today, one in five of working-age households have no one earning a wage. In place of welfare, there should be work. So today, this Budget is taking the first steps to create the new welfare state for the 21st century.
The welfare state was and remains a great British achievement. It was set up to provide security for all, and opportunity for all, goals which are as relevant today as in 1945. But for millions out of work or suffering poverty in work, the welfare state today denies rather than provides opportunity. So it is time for the welfare state to put opportunity back into people's hands.
First, everyone in need of work should have the opportunity to work. Secondly, we must ensure that work pays. Thirdly, everyone who seeks to advance through employment and education must be given the means to advance. So we will create a new ladder of opportunity that will allow the many, by their own efforts, to benefit from opportunities once open only to a few.
Starting from next year, every young person aged 18 to 25 who is unemployed for more than six months will be offered a first step on the employment ladder. Tomorrow, my right hon. Friend the Secretary of State for Education and Employment will detail the four options, all involving training leading to qualifications—a job with an employer; work with a voluntary organisation; work on the environmental task force; and, for those without basic qualifications, the chance of full-time education or training.
With those new opportunities for young people come new responsibilities. There will be no fifth option—to stay at home on full benefit. So when they sign on for benefit, they will be signing up for work. Benefits will be cut if young people refuse to take up the opportunities. This new deal for the young is comprehensive, rich in opportunity, linked to the development of skills and has already attracted the support of some of Britain's leading companies.
I urge every business to play its part in this national crusade to equip this country for the future by taking on young unemployed men and women. I appeal to every voluntary organisation to make a further contribution to the work that they do in the community by taking on a young person. I will make it possible for every Member of the House to act as an ambassador for this venture,


encouraging young people in their constituencies, consulting local businesses and bringing them together to play their part in this new deal for young people.
There are 350,000 adults who have been out of work for two years or longer. So the second component of our welfare-to-work programme will offer employers a £75-a-week subsidy to employ long-term unemployed men and women. Many of those unemployed who lack skills are debarred by the 16-hour rule from obtaining them. For this group—the unskilled—the 16-hour rule will now be relaxed, so that when the long-term unemployed sign on for benefit, they will now sign up for work or training.
That programme of £3.5 billion—which includes an unallocated reserve of £500 million—will provide money during a full Parliament. It will be the main item funded from the windfall tax on the excess profits of the privatised utilities, the details of which I shall give the House shortly.
But in this Budget I will address also the needs of two other important groups in our society—lone parents and those in receipt of incapacity and disability benefits who, as a matter of principle, should have the right to work. There are now 1 million lone parents bringing up 2 million children on benefit. Any welfare-to-work programme that seriously tackles poverty in our country must put new employment opportunities in the hands of lone parents. So today I am allocating a total of £200 million from the windfall fund for the most innovative programme that any Government have introduced for advice, training, and day and after-school child care to support lone parents.
Currently, lone parents receive little encouragement to seek work before their youngest child is 16. Under the programme that I am announcing today, when their youngest child is in the second term of full-time schooling, lone parents will be invited for job search interviews and offered help in finding work that suits their circumstances. On Friday, my right hon. Friend the Secretary of State for Social Security will explain to the House the full details of how that new radical programme will be introduced.
A generation of parents have waited for the Government to introduce a national child care strategy. From this Budget onwards, child care will no longer be seen as an afterthought or a fringe element of social policies. From now on, it will be seen, as it should be, as an integral part of our economic policy.
First, we shall increase the supply of child care in our country and make it more accessible. In addition, as part of the new deal for young people, we shall encourage voluntary organisations to take on and train young people and help them into careers as child care assistants.
We believe that over a five-year period, as many as 50,000 young people can be trained as child care assistants. We shall make child care more affordable as well. From next summer, every lone parent with more than one child, who qualifies for family credit, housing benefit or council tax benefit, will have the first £100 of weekly child care costs disregarded in calculating in-work benefits. Every lone parent on family credit with children 12 years old or younger will be able to receive help.
Lottery money will be available for after-school clubs, and as we replace the wasteful and chaotic system of nursery vouchers, we shall be able to offer reliable access to nursery places for every four-year-old in Britain. With those measures, which bring both child care and employment within the reach of many more parents, we have taken the first step towards a national child care strategy for the United Kingdom.
In 1997, no one in our society who wants to do some work should be excluded from the right to work because of disability or incapacity. So, as a final element of our welfare-to-work strategy, we shall bring forward proposals to help those who are disabled or on incapacity benefit, and who want training or work. To fund that programme and other measures, I have set aside £200 million from the windfall fund.
Taken together, those comprehensive and ambitious initiatives mean that from now on, no section of society—and no one—should suffer permanent exclusion. For too long, the United Kingdom has been united only in name. From today, ours is a country where everyone has a contribution to make.
The second principle of the new welfare state is to ensure that work always pays. In May, I established, under the chairmanship of Martin Taylor, a review to consider how we canstreamline and modernise the tax and benefit system to help employment opportunities and work incentives, and to assist in strengthening family life.
We will introduce a 10p rate of income tax as soon as it is prudent to do so. A 10p tax rate, combined with a cut in benefit tapers, will reduce in-work poverty—as, too, will the minimum wage, which the Government will introduce after advice from the new low pay commission. Set at a sensible level, the minimum wage will not only establish a floor under wages but ensure that in-work benefits act as a genuine top-up for low-paid workers rather than a subsidy for low-paying employers.
I have therefore also asked Martin Taylor to consider at an early stage the advantages of introducing a new in-work tax credit for low-paid workers. It would draw upon the successful experience of the American earned income tax credit, which helps reduce in-work poverty, and now helps 19 million lower-paid workers in America.
Conclusions that emerge from this tax benefit review will inform the judgments in my next Budget, which I have decided will be in the spring of 1998.
The third component of the new welfare state is the establishment of a skills ladder, so that every employee is encouraged to learn skills throughout his or her working life. It is our intention to introduce individual learning accounts, and to increase the staying-on rates at schools and colleges, we shall complete our review of educational finance and maintenance for 16 to 18-year-olds to ensure that resources are used to support those most in need.
Just as the Open university has, since the 1960s, offered thousands second chances in higher education through television in their homes, the new university for industry that we propose can, from the 1990s onwards, through satellite, cable and interactive technologies, bring lifelong learning direct to millions in their homes as well as workplaces.
I have therefore allocated from the welfare-to-work budget £5 million to start up the public-private partnership that will fund the university for industry. By those


measures, which will create work, make sure that work always pays, and provide recurring opportunities for lifelong learning, the new welfare state will help equip Britain for the modern world.
A country equipped for the future should also have a modern tax system based on principle. The tax system sends critical signals about the economic activities that a society wishes to promote and deter. Today, I shall start to put those principles into practice by demonstrating our commitment to the environment. As the statement of environmental principles set out by the Financial Secretary to the Treasury, my hon. Friend the Member for Bristol, South (Dawn Primarolo)—published today—shows, we are determined that our tax system and economic policies as a whole encourage the good and discourage the harmful.
The extraction of aggregates—including stone, sand and gravel—involves significant environmental costs and damage to the landscape, which may go beyond that recognised in the scope and level of the landfill tax. Too little is also being done to discourage water pollution. The environmental case for charges on polluters needs to be examined carefully. After a period of consultation, I will return with any proposals in those two areas in my next Budget.
Existing taxes, including our excise duties, must also advance the Government's environmental objectives. So to reduce pollution, lorries and buses that meet low emission standards will, from next year, attract a reduction of vehicle excise duty by a maximum of £500. Rises in vehicle excise duty, broadly in line with inflation, will take place from 17 November. In line with the environmental objectives that I have set out, road fuel duties will increase by an extra 1 per cent. every year over and above the annual 5 per cent. real rate of increase established by the previous Government. Petrol will go up by the equivalent of 4p a litre from 6 pm this evening.
I have also decided to raise the annual rate of increase in tobacco duties. From 1 December this year, these will be increased by an extra 2 per cent. a year—this year by another 5p—above the annual 3 per cent. real rate of increase established by the previous Government. In the normal course of events, the price of a packet of 20 cigarettes would have risen by just over 14p. Under my proposals, the price of a packet will rise on 1 December by 19p.
Alcohol and tobacco duties demand careful consideration this year, not least because of the impact of fraud, smuggling and cross-border shopping. I have therefore decided to review all alcohol and tobacco duties. While that review is under way, inflation-only rises for alcohol will take effect from January.
The tax burden avoided by the few falls on the many. In eight weeks of this Government, we have already identified a series of significant tax abuses. I am introducing measures with immediate effect to end tax abuses through avoidance of corporation tax, value added tax and pay-as-you-earn. Changes to insurance premium tax to block an abuse relating to lone-term health insurance will take effect from 1 October. I also propose to modernise the rules governing transfer pricing and controlled foreign companies. The details of those changes will be available at the end of my speech. In total, those initial measures to tackle tax avoidance will bring in a cumulative total of £1.7 billion over four years.
A Government committed to the proper funding of public services will not tolerate the avoidance of taxation, and we will be relentless in our war against tax avoidance. I have instructed the Inland Revenue to carry out a wide-ranging review of areas of tax avoidance, with a view to further legislation in future Finance Bills. I have specifically asked the Revenue to consider a general anti-avoidance rule.
The principle of fairness in taxation will guide all my Budget decisions. I can announce today that at this, the first opportunity, the Government will honour their pledge to cut value-added tax on fuel and power. To help to pay for that, we will withdraw tax relief for private medical insurance for the over-60s. It costs £140 million a year, and it has failed to achieve its original purpose of substantially increasing the take-up of private medical insurance.
I would like to abolish VAT on fuel, but European rules prevent me from doing so. Therefore, VAT will be cut to the lowest level compatible with European law—5 per cent.—on 1 September, well in advance of winter fuel bills.
I now come to other taxes. In this Budget, I have no changes to make to income tax at either the basic or the top rate. I will not extend VAT to children's clothes, food, books, newspapers or public transport fares; nor will I, during this Parliament. This is a Government who keep their promises on tax.
To cut fuel bills further, I intend to make a further tax cut. The gas levy imposed by the previous Government has pushed prices for domestic consumers higher than they would otherwise be, so from next April we are reducing the gas levy to zero. Eighteen and a half million domestic customers will benefit from the change: their gas bills should fall by about 2 per cent. on average. As a result of those two changes—including the reduction in VAT on fuel, and other price cuts—I expect gas prices to fall in real terms by 5½ per cent. this year and 11 per cent. next year, which will mean a fall of £90 in next year's fuel bills compared with last year's.
Many of the least well-insulated houses in Britain are occupied by older people. No pensioners should be in a position in which, for reasons of finance, they cannot adequately insulate their homes. Today, with our new programme of training and jobs for young people, we are able to expand the national programme of home insulation. Contractors in the home energy efficiency scheme, and voluntary organisations, will be encouraged to take on young people to insulate the homes of pensioners. That will give jobs and skills to our young people; it will help and protect our elderly; it will improve our environment; and it will tackle fuel poverty.
Poorly insulated housing is but one of the most conspicuous failures of housing policies over the past 20 years. Even more serious is the inadequate provision of low-cost rented accommodation throughout our country. It has led to overcrowding, the costly and wasteful use of bed-and-breakfast accommodation and, in some cases, homelessness.
The Government have a commitment to decent housing at affordable rents because we believe that overcrowding and homelessness on the scale that we have seen are intolerable in a civilised society. Building and repairing homes will answer a pressing social need and offer opportunities for skilled and productive employment.
I can therefore announce the first step in a practical and measured programme to phase the release of capital receipts. Local authorities will have borrowing consents for an additional £900 million—£200 million this year, and £700 million next year—for building new houses and repairing their existing stock. The detailed proposals for England, together with measures specific to Scotland, Wales and Northern Ireland, will be announced by the relevant Secretaries of State in due course.
For most people, the acquisition of a house is the biggest single investment that they will make. Home owners rightly expect their investment to be protected by sensible policies pursued by Government. I am determined that as a country we never return to the instability, speculation and negative equity that characterised the housing market in the 1980s and 1990s.
Volatility is damaging both to the housing market and to the economy as a whole, so stability will be central to our policy to help home owners. We must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery. I have therefore decided that it is right to take two measures aimed at stability in the housing market.
First, I will raise stamp duty from 1 per cent. to 1½ per cent. on property sales above £250,000 and to 2 per cent. for property sales above £500,000. This will take immediate effect after the Budget resolution has been approved by the House.
Secondly, continuing the reforms begun by the previous Government, who removed mortgage tax relief at the higher rate of 40 per cent. in 1991, and cut it to 15 per cent. by 1995, I propose to reduce mortgage tax relief by a further 5 per cent., from 15 per cent. to 10 per cent., from April 1998.
The timing of my measure should help to avoid a return to the conditions of the 1980s, when the failure to take early action guaranteed worse problems later on. I believe that these measures will help to secure what we all want: a more balanced recovery.
Our reform of the welfare state—with the programme to move the unemployed from welfare to work—is funded by a new and one-off windfall tax on the excess profits of the privatised utilities. The tax will apply to companies privatised by flotation and subject to economic regulation under specified Acts of Parliament.
In determining the details of the tax, I believe that I have struck a fair balance between recognising the position of the utilities today and their undervaluation and under-regulation at the time of privatisation. The windfall tax will be related to the excessively high profits made under the initial regime. A company's tax bill will be based on the difference between the value that was placed on it at privatisation and a more realistic market valuation based on its after-tax profits for up to the first four full accounting years following privatisation.
In preparing the windfall tax, we looked more broadly at the position of the affected companies. As a result of my earlier announcement, justified on its own merits, to reduce the gas levy to zero, I am satisfied that no company faces an unduly heavy tax burden. The windfall tax will raise some £2.1 billion from the electricity sector, around

£1.65 billion from the water sector, and some £1.45 billion from the remaining companies. After taking the reduction in the gas levy into account, which will cost the Government £400 million over the next three years, the net effect of the gas levy and the windfall tax together will raise £4.8 billion. After consulting the regulators, it is my judgment that the tax can be paid without any impact on prices, investment, or the quality of service to customers; or, in my view, on employment.
In recent weeks, many companies have asked to pay the tax in instalments. I have now agreed that that shall be the case. It will be a one-off tax payable in two instalments. The first instalment will he paid on 1 December 1997, the second a year later. Full details of how the windfall tax will apply and the companies that will pay it will be set out in an Inland Revenue press release, which will available at the conclusion of the statement.
Based on the fiscal tightening that I have announced today, I can give full details of our five-year deficit reduction plan. That plan is aimed at reducing the structural budget deficit. It is made possible by a long-term commitment on our part to financial discipline. It takes into account the uncertainties and risks involved in the economic cycle and forecasting it. It is underpinned by our comprehensive review of the way in which Government spend their money; and it matches rigour today with a long-term commitment to prudent and sustainable public finances.
In January this year, I announced that we would adhere for two years to the agreed control totals for public spending. That commitment is reaffirmed today and integral to the Budget statement. I announced that there would be no spending round this year; nor will there be.
Departments are working within already announced departmental spending totals to reorder spending from low-priority to high-priority areas. I am pleased to report that they are not only identifying waste and inefficiencies in existing spending, but are now redistributing those savings to the long-term priorities of this Government, not the previous one. So the figures that I can now give for my deficit reduction plan exclude windfall tax revenues.
Borrowing was projected in the previous Budget to be £19¼ billion this year, but it is now set to be £13¼ billion, and borrowing that was projected to be £12¼ billion next year is now set to be £5¼ billion. So our deficit reduction plan ensures that borrowing, which was £22¼ billion last year, is now set to fall to £5½ billion next year.
Beyond those years, I am publishing a range of projections based on different assumptions for spending. In every case, for the next three years we meet the golden rule—we see debt falling as a proportion of national income and, because of our discipline and measures that we have taken, we go below the borrowing projections of the previous Government. For this year and for the foreseeable future, we are comfortably within the Maastricht criteria for levels of both debt and borrowing.
Tough and prudent management is our watchword in what will continue to be a thoroughly disciplined approach to the public finances.
The comprehensive spending review will determine overall priorities for the early decades of the next century. In the case of the national health service, the first stage of our cuts in bureaucracy is being implemented this year.


By next spring, the first conclusions from the strategic review of London hospitals will be implemented and we will act to improve the organisation of services, including merging national health service trusts. By dismantling the inefficient internal market, we shall no longer have to spend money promoting competition and servicing innumerable short-term contracts and the administration that goes with them, all at the expense of patient care. That will now change.
Because we have reinvigorated the private finance initiative, we shall shortly announce a new hospital building programme across the country. We shall also act to recoup in full the cost of treating road traffic accidents from insurance companies. That, like the action that we are taking against prescription fraud, shows our determination to ensure that NHS resources are focused on front-line patient care.
In normal circumstances, the £5 billion reserve for 1998–99 would be distributed during the annual autumn spending round, with the allocations announced at the time of the November Budget. There is no spending round this autumn, and there will be no Budget until next spring. I propose that the majority of the reserve be retained for contingencies that may arise in the coming year. But now that the long-term changes are under way, I want the NHS also to be able to plan for the year ahead. I want it to do so in the sure knowledge of a prudent and realistic allocation for 1998–99, which will ensure that services are maintained and patient care is secured.
The long-term plans that we have agreed mean that we are now sure that the money will go where it is needed—direct to patient care. So I have decided to allocate from the reserve to the NHS for 1998–99 a sum of £1.2 billion. This does more than meet our commitment to the people of this country for a real-terms increase in resources. Health spending will now rise by 5 per cent.—2¼ per cent. in real terms—the same as our projection for the trend growth rate of the economy as a whole. The public rightly want to see more money put into the NHS, but they want the money to go directly to patient care. So this money is being granted on the firm agreement that the administrative reforms that we propose for the health service will be fully implemented and that front-line patient care will benefit.
Education is our country's priority. It holds the key to our future. The Government must be satisfied that resources in education are going direct to learning in our classrooms. My right hon. Friend the Secretary of State for Education and Employment and, Ministers in Scotland, Northern Ireland and Wales, will bring forward proposals so that every school can meet standards for results and discipline. We will ensure that schools and local education authorities meet targets for raising standards in their areas. They must demonstrate that money is being spent on improving the quality of pupils' education. For next year, while we review the future arrangements for local authority finance, capping will remain in place, but I propose to allocate from the reserve for next year, and specifically for use in schools, an additional £1 billion for education. The details will be announced by the Secretaries of State for Education and Employment, for Scotland, for Wales and for Northern Ireland.
Traditionally, these announcements of revenue and allocations would complete a Budget, but I have one more announcement to make. The windfall tax will finance our

measures for employment and training, but there is nothing more important to the training of young people than what happens in our schools. Indeed, many of the problems that our welfare-to-work programme must now address start in our schools. We cannot run a first-rate economy on the basis of second-rate education. Economic success tomorrow will depend on investing in our schools today. But at the present rate of progress, many of our children will be educated for the 21st century in classrooms built in the 19th. Today, 1 million pupils are being educated in classrooms built before the first world war.
If our schools are to educate for the needs of the 21st-century economy, they must themselves become schools that are fit to learn in and equipped for the 21st century. By encouraging schools to engage in public-private partnerships, any public investment that we make can lever in even more resources to renovate our schools.
I want schools not just to repair the roofs and the fabric, but to acquire the modern equipment and computers that they need. I have therefore decided to allocate cash from the remaining proceeds of the windfall tax for an immediate programme of capital investment to equip our schools with the infrastructure, technology and the bright modern classrooms that they need.
My hon. Friend the Paymaster General and Education and Employment Ministers will invite schools to submit plans showing how they propose to upgrade, modernise and become schools fit for the 21st century. The details will be announced in due course. I therefore propose to make available £1.3 billion over the course of this Parliament, representing a capital investment that averages almost £150 for every pupil in this country.
Taken together with the extra year-to-year expenditure that I have just announced, this Budget allocates £2.3 billion in new resources for our schools. With that increase in educational investment, we are taking the first step towards delivering our manifesto commitment to increase the proportion of national income spent on education. In education, as in every other area, we are honouring our pledges to the British people.
The measures that I have announced today for stability, for investment, for employment opportunity for all and for education will make Britain better equipped and more ready to face the future with confidence.
Previous Budgets pursued the short-term interests of the few. This Budget advances the long-term interests of the many. It is a Budget that equips Britain for the future—meeting the people's priorities. It is a people's Budget for Britain's future. I commend it to the House and to the country.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following Motion:—
Hydrocarbon oil (rates of duties and rebates) (Motion No. 7).— [Mr. Gordon Brown.]

put forthwith, pursuant to Standing Order No. 51 (Ways and Means motions), and agreed to.

Mr. Deputy Speaker: I now call on the Chancellor of the Exchequer to move the motion entitled "The windfall tax". It is on that motion that the unified Budget debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week, and they will then be decided without debate.

Budget Resolutions and Economic Situation

WINDFALL TAX

Motion made, and Question proposed,
That provision may be made for imposing a tax on the amount of the windfall from which a company was benefitting on 2nd July 1997 in any case where—

(a) an undertaking whose privatisation involved the imposition of economic regulation has been privatised by means of a flotation; and
(b) the profits of the undertaking in the period after the flotation show that the company was benefitting on that date from a windfall from that flotation.—[Mr. Gordon Brown.]

Mr. William Hague: On a personal level, I congratulate the Chancellor on his fortitude in delivering his speech and doing so within the space of one hour with only the assistance of water. I could congratulate him more enthusiastically if all of the contents of the Budget had been delivered to Parliament first, as we discussed earlier today.
We were told by the Prime Minister and the Leader of the House that what was printed in today's Financial Times had all been speculation. Was it not remarkable that the Chancellor opened his speech by saying that he had a five-year deficit reduction plan and the headline in the Financial Times today was:
Budget 'to cut deficit over 5 years?
It is extraordinary that there was such speculation and that it turned out to be so well founded. It is extraordinary, too, that the speculation referred to the abolition of the dividend tax credit and that is exactly what the Chancellor announced in the course of his Budget speech. They must be remarkable journalists at the Financial Times, who not only dreamt that a senior member of the Government had told them something, but dreamt exactly accurately what that senior member of the Government might have told them.
It is extraordinary in the view of the Opposition that Government sources revealed those measures in advance. It is to be hoped that the Government will now come to realise that Budget leaks can affect the movements of billions of pounds and the savings of millions of people. They should have a thorough investigation and they should report the results of that investigation to the House.
The Chancellor also opened his speech by saying that he would be bound by strict rules, which he would adopt for the rest of this Parliament. We could be forgiven for noting that all Labour Governments have started with strict rules with which they were going to bind themselves throughout the Parliament and all have ended up abandoning them.
There are some things in the Budget that we will certainly welcome: the cut in taxation for small companies is most certainly one of them. There are some things the details of which we will have to consider as our debates on these matters become clear. But one thing about the Budget is very clear. When the Prime Minister said before the election:
We've no plans to increase tax at all.
he did not mean a word of it.
This is a tax-raising Budget. When the Chancellor says that he is tightening fiscal policy by £5¾ billion, he means that he is introducing a tax-raising Budget; and the changes to advance corporation tax and the changes to MIRAS amount to tax rises that, before the general election, the Labour party denied it would introduce. Not only did the Prime Minister say, on 21 September last year:
We've no plans to increase tax at all",
but, on 2 August, he said:
Our proposals do not involve raising taxes … If we have any such proposals we will make them clear before the next election".
Why were these proposals not made clear before the general election? On 8 January this year, he said that
the programme of the Labour party does not imply any tax increases at all".
If that was true, why have these tax increases been announced today?
We can be relaxed about some things. Measures such as 2 per cent. on stamp duty for houses worth over half a million pounds will be of concern only to a small number of rich people such as the Prime Minister. Many people can relax about that, but other people will have to pay for the Labour party having broken its election promises in the Budget. The changes to MIRAS will add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes. Those are not my words—they are the words of the Prime Minister a year ago. He said that restrictions to MIRAS would
add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes".
Can he honestly say that he gave the country an accurate idea of what he would do on this subject, if and when he came to power? Labour Members have never been in sympathy with home ownership, and they are clearly not going to start being in sympathy with it today.
In this Budget, the Government have broken a central election promise, trying to comfort their supporters by saying that there will be a £1.2 billion increase in health service spending. But last year there was a £1.6 billion increase in health service spending.
As we look at this and future Budgets produced by the Labour Administration, we must always remember that rarely, if ever, have a Government had such cause to be grateful to their predecessors when it comes to the economy. The previous Government, and my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) as Chancellor, left the economy thriving. The Government should note that the man who said that was Lord Healey on "The World at One" this afternoon. Every serious commentator agrees: we have bequeathed to this Government the strongest set of economic circumstances in the lifetime of my generation. We have left them the longest period of sustained low inflation for 50 years, the lowest mortgage rates for 30 years, the lowest taxes of any major European country—although Labour has now begun to increase them—the lowest unemployment of any major European country, the best record on job creation and the highest sustained growth shown by any major European economy.
Those were not accidents of the economic cycle; they were a direct result of the policies pursued by Conservative Governments—policies obstructed, denigrated and opposed by Labour.
The World Economic Forum has described Britain as the envy of continental Europe,
with an economy reborn out of sweeping privatisation, deregulation and other structural reforms that is now well poised to compete in the global economy.
That is the truth about the British economy today, and we shall hold the Government to account for their stewardship of that unrivalled inheritance.
Central to this Budget, as the Chancellor has made clear, is the so-called windfall tax. In last year's Budget debate, the current Chancellor declared:
The windfall tax is not a tax on ordinary families."—[Official Report, 27 November 1996; Vol. 286, c. 366.]
That would be true if ordinary families did not pay bills for gas, electricity, water or the telephone; if ordinary families did not own shares; or if ordinary families did not invest in pension schemes. If all those things were true, I suppose the right hon. Gentleman would be right.
The Chancellor has said that the windfall tax will have no impact at all on prices, investment or anything else that he could care to mention. He is looking for a free lunch from the windfall tax, and he will find that it is not available. He should make it clear in this debate that pensioners will be compensated for any increase in their fuel bills. He should make clear whether low-income families will receive an increase in income support to cover their extra costs.
I know that the Chancellor would like to think that the windfall tax will be paid by businesses, not by individuals, but he is a well-read man. He must have read the standard work on tax, "The British Tax System", which declares:
There is no such thing as a tax on firms. The effective incidence of all taxes is ultimately on individuals.
Surely the Chancellor agrees with that. The author, after all, is Professor John Kay, business guru to the Prime Minister himself.
The Chancellor would like to think that the windfall tax will be paid by the so-called fat cats, by stripe-shirted speculators in the City. But it will not be. Such people sold up and took their money long ago. It is the current shareholders who will foot the bill. Far from taxing excess profits, the Government are taxing the people unlucky enough to be holding the parcel when the music stops. The Chancellor says that he wants to put fairness back into the tax system, but what is fair about taxing people on a windfall that someone else made in the past?
Billions of utility shares are held by ordinary men and women through pension funds and insurance policies. Anyone with a pension, anyone with an insurance policy, anyone who is working hard to build up a nest egg for the future, will be hit by the windfall tax. It is a savings tax by another name.
The Chancellor has claimed that that change has already been discounted by the City. Up to a point it has, but that means that the prospect of billions of pounds of extra tax has already done lasting damage to the shares in which millions of people have invested for the future.
The Chancellor has made much of the electoral mandate that the Government claim for the windfall tax, but few people can have forgotten the outrage of Labour


spokesmen and spin doctors during the general election campaign when we exposed the £1½ billion privatisation black hole in the Labour party's finances, which the right hon. Gentleman now seeks to fill with these taxes.
There's no black hole for the Labour party".
said the Chancellor, during the general election campaign: Labour had changed; they would embark on a programme of privatisation. "We'll privatise everything", the Sunday Telegraph was told.
Where were those measures in today's Budget? Sure enough, as we predicted, some of the tax increases in the Budget have had to be brought out to fill the £1½ billion black hole which, indeed, was there in Labour's plans. The Chancellor may have filled the black hole in his finances, but he has blown a new black hole in the credibility of the Labour party.
The Chancellor's next tax increase was the change to dividend tax credits—advance corporation tax—on the ground that, if you do something that people do not understand very well, they will not notice it and you will get away with it. But for many people, their pension is the single biggest saving that they will ever build up, and every word that we heard today about advance corporation tax was another hammer blow against pensions and savings—another savings tax from the Government.
Pensions are one of our great success stories. The United Kingdom has built up more than £650 billion in pension funds—more than those of all the other European Union countries put together. We understand why the Chancellor has gone for ACT. It is one of the most complicated taxes known to man. It is a tax strategy which halves the blame for him, but doubles the pain for everyone else.
The change means that pension funds will be able to claim less tax back, so their revenue will be lower, their growth will be lower, pensions will be smaller and pensioners will be worse off. Taken together with the damage resulting from the windfall tax, the Budget delivers a double whammy against pensions. The bills for the decisions announced today will be paid by millions of hard-working people, many years down the line. It is a smash and grab raid on pension funds in this country, and it is a cynical betrayal of the millions who have built up pensions and now see them devalued.
I welcome the Chancellor's assurance about how charities will be affected by the changes to ACT, but how will those changes interact with the new minimum funding requirements for pension funds? What impact will they have on investment? He says that they will help investment, but if businesses are obliged to dip into their funds to top up company pension schemes, they may end up cutting the very investment that the Government want to encourage.
The Chancellor will regret the measure that he has announced on ACT—his attempt to hide his tax increases today. He is using some of the money produced by it to reduce VAT on fuel, but can he confirm during this debate that his timing of that measure means that the reduction in VAT will feed through into smaller increases in the state pension, so that he can claw back from pensioners some of what he has given away?
In the Chancellor's eagerness to announce new taxes, he has confirmed—although, of course, it was confirmed for him by his press office this morning—that tax relief on private health insurance for the over-60s is to be abolished. After the windfall tax and advance corporation tax, that is a savings tax in yet another form, which will affect 600,000 pensioners.
That is an utterly vindictive way in which to raise extra money for the Treasury. Moreover, it is likely to prove counter productive, because industry estimates suggest that up to 200,000 people could cancel their policies. How will that help a Government trying to meet their commitment to get 100,000 people off the waiting lists?
The Chancellor also announced his welfare-to-work scheme. We agree with the scheme's objective. Indeed, it is hard to think of a more worthy objective and we shall want to look carefully at the details of some of the proposals. I remind the Chancellor that the last Government had a welfare-to-work programme and it worked: unemployment among the under-25s has fallen by 100,000 a year every year for the past four year—400,000 in the past four years. We did that without a windfall tax, a tax on prices or a tax on pension funds.
Unemployment in Britain today is among the lowest in the major European economies. That is what a policy of flexible markets and welfare reform has already yielded. We now have a policy of subsidy and, whatever its social benefits, the Chancellor is likely to find that job subsidy schemes often cost more than they save. The reasons are obvious: first, money is spent on people who would get jobs anyway; secondly, money is spent creating jobs that are not created at all but where employers simply destroy the jobs of people who are not eligible for the subsidy; and, thirdly, money is spent creating jobs that turn out to be only temporary. Business men have admitted that they could easily use the scheme to take on the unemployed, employ them for as long as the subsidy lasts and then replace them with another round of subsidised employees.
The Chancellor is, therefore, likely to find a great deal of disappointment in the scheme that he has put before the House today. If the Labour party believes that reducing the cost of employing people by a £75 a week subsidy will increase the number of jobs, it must accept that increasing the cost of employing people with a minimum wage and a social chapter will destroy jobs.
Labour's welfare-to-work policy directly contradicts its industrial policy. The Department for Education and Employment will be busy trying to create jobs while the rest of the Government will be busy destroying them. Worse still, their make-work schemes will be temporary and limited to a certain number of jobs, while the minimum wage will be permanent and could affect millions of jobs. As the Deputy Prime Minister once admitted, any silly fool knew that a minimum wage would affect the number of jobs available. From the way in which the Government have gone about their business over the past two months, clearly not every fool knows that it will affect the number of jobs available.
What is on offer from the Government is temporary job creation but permanent job destruction—not welfare to work but work to welfare. They say that they want to put more people back to work, but they are now departing from the policies that have already put more people back to work in Britain than in the rest of Europe.
We welcome some aspects of the Budget. I mentioned the change to the tax rate for small companies. We also welcome the Chancellor's continued use of tax for environmental purposes, although we want to scrutinise the small print carefully. We would prefer to use environmental taxes to provide the right incentives, but to reduce the tax burden elsewhere, as we did recently with the landfill tax, the revenue from which was used to reduce the national insurance rate for employers.
The Chancellor is using environmental taxes as another vehicle by which to raise the tax burden overall, without producing compensating reductions elsewhere. He calls it a "green Budget", but it is actually still a red Budget which increases taxes on the people of this country.
The Chancellor has produced a Budget, some aspects of which we welcome, but most aspects of which we shall need to question or oppose. It is a tax-raising Budget which breaks the central promises on which the Labour party fought the last election. It flies in the face of the Prime Minister's assertion that no tax increases would be needed. Boxed in by the Prime Minister's commitment, the Chancellor has had to grub around for tax increases which he hopes nobody will understand or notice. The windfall tax is a gimmick for the short term, whereas we needed measures to serve our recovery for the long term.
The Budget is full of missed opportunities. What has it done for families who want to save or invest? What has it done for families who want to work hard and keep most of their earnings? What has it done to simplify the tax system, to help pension funds or to ensure that the strongest recovery in decades is long lasting?
The Chancellor should be warned that the real judgments on the Budget will be passed over the years to come. In future years we will want to know, and the country will want to know, what the Government have done with the best economic inheritance in decades. They had better be ready to be held to account for that.

Mr. Ian Bruce: On a point of order, Mr. Deputy Speaker. May I put it on the record that, earlier today, I contacted my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the shadow Chancellor of the Exchequer, and told him how much the windfall tax would be. I seek your guidance, Mr. Deputy Speaker, about how I should proceed, knowing that that information was leaked to someone who was an adviser to the electricity industry. It was available to that person before the Budget statement. Clearly, that could give rise to criminal charges. Should I write to Madam Speaker, put the matter in the hands of the police or speak to the Standards and Privileges Committee?

Mr. Deputy Speaker: Order. That is not a point of order on which the Chair can rule. The hon. Gentleman has been here long enough to know the various avenues open to him to pursue his complaint.

Mr. Paddy Ashdown: The right hon. Member for Richmond, Yorks (Mr. Hague), who leads the Conservative party, is new to his job and has just made what is regarded as the most difficult speech in any political year. However, his speech will not be considered memorable except in one respect: the sheer brass neck

of a representative of the Conservative party criticising someone else for raising taxes. That will remain in my mind for a long time.
I congratulate the Chancellor of the Exchequer on his first Budget statement, which was long and detailed. It contained much with which we agree. The most welcome aspect is his abandonment of the departmental spending limits and ceilings for expenditure, over next year if not this year. We have argued for that for some time. It is worth mentioning that it is easy to spend contingency reserves in that way, which may not be wise in the long term, but we welcome the outcome, although it is offset by some of the Chancellor's decisions about rises in inflation and the consequences of that for the cash-limited budgets of those Departments.
There are two immediate aims that the Budget must achieve. It must dampen down overheating in the economy and reduce upward pressure on sterling. There are also several longer-term aims: to establish a framework for Britain's economic success, based on sustainable inflation; to invest in education as the key to that success; to incorporate environmental costs into our economy and the pattern of our lives; to begin to attack social and economic exclusion; and to reverse the neglect of key public services, especially health and education, under the Conservatives. Above all, after years of broken promises, this should have been a Budget that began to rebuild people's trust in politics and taxation.
I believe that, in framing the Budget, the Chancellor probably set out to achieve very similar aims to those that I have just outlined. The question that we must ask is to what extent he has succeeded.
I shall deal first with trust. When, in last November's Budget, the Conservatives cut income tax by 1p and Labour was not prepared to oppose them, I said:
Both … know that it does not matter which of them is in government, the tax cuts that they both agreed today for the sake of the election will have to be put back some time after the election.
I went on to warn that if that happens,
the British electorate will feel that they have been lied to … trust … in politicians will diminish, and again everyone in the House will wonder why the people of this country do not believe a blind thing that we say."—[Official Report, 26 November 1996; Vol. 286, c. 183.]
It gives me no pleasure to say that in the intervening months, that is exactly what has happened. We all knew then and throughout the election campaign that whoever was in power, this Budget would have to contain measures for fiscal tightening and for taking steam out of an economy that had become dangerously overheated.
Only the Liberal Democrats were prepared to admit that, then and during the election, and to argue for an economic approach that took money out of the economy and used it for specific, targeted improvements in education and health. The Labour and Conservative parties tried to pretend that we could have both tax cuts and better public services. Today's Budget proves them comprehensively wrong.
The Budget will mean higher taxes and almost certainly, in the next year at least, worsening public services. The Labour party told us before the election that it wanted to build
a new trust on tax with the British people,
I agree with that, but it cannot be done by saying one thing before and during an election, and doing exactly the opposite afterwards, even if that is necessary.
One cannot rebuild trust by ruling out income tax increases for press headlines, while keeping up one's sleeve hidden taxes that will hit the ordinary taxpayer just as much. One cannot rebuild trust by saying, "Enough is enough" to 22 Tory tax rises, and then adding to them in one's first Budget. We must all learn that unless we, as politicians, can get out of the ridiculous corner into which we have painted ourselves with regard to tax, we will never recreate trust in the political process.
On the broader issue of economic management and the current state of the economy, we understand the importance of ending the pattern of boom and bust that has so often occurred in Britain. We therefore welcome the Government decision to do what was in our manifesto but not in theirs, and to give the Bank of England greater control over interest rate policy. We are less keen on the Chancellor's decision to weaken the inflation target, which was in Labour's manifesto. Similarly, I welcome the more rule-based approach that the Chancellor outlined today. We have long called for that. That thinking must be followed through in the Budget.
We warned after the Budget last November that if we did not act to cool the economy then, we would have to do much more to achieve that now. Nothing would be more damaging to our economic recovery than to let the present consumer boom increase inflation, raise interest rates and boost sterling still further. To do that would undermine industry and investment and end, once again, in a return to recession and unemployment.
At first sight, the Chancellor seems to have ignored that danger, at least in part, and to have decided instead that his first priority is to reduce public borrowing. He has chosen to do so mainly through higher taxes on business. However, as public borrowing is falling quickly in any case, that is the wrong target. Instead of shackling businesses, he should have restrained the consumer, in order to prevent the higher interest rates, higher inflation and less competitive sterling that will surely follow. He had not done nearly enough to restrain consumer spending.

Mr. John Wilkinson: For all the faults in the Budget—and there are many—it has not increased the taxation on businesses. Clearly, the right hon. Gentleman wrote his speech before he had heard the Budget statement. Reductions in corporation tax for larger companies and smaller one are very welcome, and the doubling of tax relief on capital allowances is noteworthy. It would help the House if members of the Liberal party listened before they spoke.

Mr. Ashdown: The hon. Gentleman has forgotten such things as advance corporation tax and the windfall tax. He knows that those will have a substantial impact on business. That is the very case that his party has been making for months.
I understand why the Chancellor has not leant more heavily on the consumer and the ordinary citizen: it is because of his manifesto pledges. In that case, the country will again, I fear, pay a high price for foolish promises made in the heat of an election, which have painted the Government into a corner that they should not be in.
We warmly welcome some aspects of the Budget, such as the intention to depart from departmental spending limits. However, if one examines the increase in inflation

and the deflator to 2.75 per cent. against the cash-limited ceilings that are established, one finds that what sounds like a generous settlement for next year is in fact rather less generous. For instance, we believe that some £300 million of the £1 billion that the Chancellor announced to improve education may be lost through the effects of that increase in inflation. Similarly, we welcome the £100 disregard on child care costs and the home insulation plans that the Chancellor has announced.
We have long advocated a shift towards green taxes and we welcome Labour's conversion, however late, to that cause. We have always proposed using new environmental taxes to reduce other taxes—such as those on jobs—rather than using them to fill black holes in Government spending. It was extraordinary to hear the Leader of the Opposition complain about that when the Conservative Government used VAT rises on fuel—which they described as green taxes—to fill up the Government's coffers.
As the Chancellor knows, we have long advocated the phasing out of mortgage interest tax relief, although we have always proposed using the revenue to replace MIRAS with a fairer and more efficient system of housing finance. Unlike the Government, for seven years we have consistently advocated the phasing out of mortgage interest tax relief, although our policy was often attacked by Labour and Conservative Members. The Government, however, attacked the Tories last year and then did the same in this year's Budget.
We also support measures to help people off benefit and back to work. We set out a comprehensive range of welfare-to-work proposals in our manifesto and again in the alternative Budget that we published yesterday. However, we remain to be convinced by some of the details of the Government's plans. In particular, in concentrating on a relatively small group—those aged between 18 and 24—the Government risk letting down much larger groups of people who are also trapped in welfare dependency. They include single parents and the long-term unemployed of all ages—men and women made redundant in their 40s and 50s who see little chance of getting back into work. It is vital that in black spots where unemployment is concentrated, more is done not just to give the long-term unemployed a temporary training place, but to give businesses long-term support and incentives to create new jobs.
While we understand and support what the Government are trying to achieve in at long last tackling unemployment and exclusion, we disagree profoundly with their means of funding it—the windfall tax. I regret that the Government cannot raise money by fair, adequate and efficient taxation using the existing system—through income tax. Why do they need to hunt around for other means of raising revenue? The windfall tax is retrospective in its application, arbitrary in its effect and, in the end, I fear that it will be unfair as well.
We do not support the excess profits earned by some of the utility industries, but, if that is wrong, it should be dealt with through regulation not expropriation. If there are excess profits, they should be returned to consumers in lower prices, better services and greater investment.
It is not the Government's money; it is the customers' money, and the Government have no right to help themselves retrospectively to other people's money even for the very best of purposes.
The Government claim that the windfall tax is a tax on fat cats, but it will be nothing of the sort. It was the most bizarre moment in the Chancellor's otherwise well-constructed and well-delivered speech when he said that the money could be raised without anyone feeling the effect. He claimed to be able to find £4.8 billion in tax without anyone having to pay for it in the long term and that it could be plucked out of thin air. It is impossible to find billions of pounds in tax without millions of ordinary people having to pay the price. Where else will the money come from? It is not the fat cats but the 19 million ordinary people with money in pension funds and the millions of others with savings and endowment policies who will be hit as hard as anyone else.
The Prime Minister claimed in the House on 21 May that
the windfall tax will not harm pensioners at air.—[Official Report, 21 May 1997; Vol. 294, c. 703.]
That is not true. A windfall tax that raises around £5 billion will cost the average person in a pension fund £79 or £80 a year.
I cannot put it better than the Institute for Fiscal Studies, which stated:
Penalising an arbitrary group of shareholders who own utility shares in the mid-90s on account of windfall gains enjoyed by their predecessors in the 1980s is difficult to reconcile with any principles of equity in taxation".
The windfall tax is one reason to oppose the Budget, but perhaps the biggest one is its failure to tackle this year's crisis in education and health.
I am delighted that the Chancellor has found an extra £1.2 billion for the national health service next year. I welcome the fact that pragmatism has replaced dogmatism and the release of the ceilings on next year's expenditure, but what will happen this year? Over the past 18 years, the average rate of growth in health spending has been 3.1 per cent. a year. This year's average planned rate of growth is 0.15 per cent. a year. That represents one twentieth of the average annual increase during the Thatcher years, when the health service was brought to its knees, and an even smaller proportion of the average Tory increase over the past few years, which has brought the NHS to its current crisis.
Is it the Chancellor's case that by giving the NHS an extra £1.2 billion next year, it will be able to borrow more to help it through this year? If so, next year's NHS budget will be further depleted. It is simply unsustainable, not next year but now. Incidentally, the Chancellor's decision to cancel tax relief on medical insurance will undoubtedly place a greater burden on the NHS.
We must address the crisis this winter when Labour Members will have considerable arguments with their constituents. Waiting lists are rising now, the number of cancelled operations is increasing and NHS trusts are sliding further into debt at a rate of £1 million a day. The crisis in our wards this winter will almost certainly be worse than in any year under the Conservatives. What will that do to the trust of millions of people who voted Labour at the general election in the belief that they had, in Labour's own words,
fourteen days to save the NHS"?
The same is true in education. I welcome the extra £1.1 billion for next year. During the election campaign, the Prime Minister said:
Labour will never put dogma before children's education".

Yet that is precisely what is happening as this year the Government stick doggedly and dogmatically to the Conservative's education spending ceilings. That will mean fewer books, less equipment, more teachers sacked and larger classes in the year ahead.
Under a Labour Government, my county of Somerset will have to sack 90 teachers this year. Labour councils are having to do the same, if not more. The Budget will bring no succour to the parents, teachers, governors or pupils who looked to the new Government to make a difference after years of cuts and neglect. They will be bitterly disappointed.
The Government are right to say that education is the key to Britain's long-term economic success, but a Budget that claims to be for the long term fails if the Government fail to understand the need for immediate investment in education if they are to preserve an education service for extra investment in future. That failure, more than anything else, makes it necessary for us, however reluctantly, to vote against the Budget.
We have made it clear that we are determined to be a constructive Opposition. That was why, in an unprecedented move, we supported the Queen's Speech a few weeks ago. We shall continue to give the Government our backing when we agree with them. That will also apply to the measures in the Budget that we support. However, the mandate that we carry into the House from the last election was not just to offer a more constructive style of politics, but to light to protect and improve our schools and hospitals. We were told that the Budget would follow through the Government's manifesto pledges of lower taxes and better public services, but it is a Budget of higher taxes and, at least in the next year, worse public services.
We are told that the windfall tax is a tax on fat cats, but I fear that it will hit ordinary people with pensions and savings. In some respects, the Budget can be applauded, but in the way that it fails our children's education and the health service on which our families rely, it does not meet the immediate and urgent needs of our country. Most people will be saddened by that and we are, too.

Mr. Stuart Bell: I am grateful for the opportunity to follow the right hon. Member for Yeovil (Mr. Ashdown), the leader of the Liberal Democrats. It is rather sad that he should take the view that, overall, he cannot accept the Budget and will not vote for it, although he was careful to say that there were certain elements in it for which he would vote. He said that the pension funds would pass on the cost of the windfall tax, to the tune of £79 or £80 per individual. He should note the statement by my right hon. Friend the Chancellor that the pension funds are in surplus and that there have been pension holidays. Indeed, he should congratulate my right hon. Friend on his statement that charities will have a different role.

Mr. Ashdown: indicated assent.

Mr. Bell: I am delighted to note that the right hon. Gentleman has taken that point on board.
The right hon. Gentleman appears to resent the fact that the Government are committing themselves to fulfilling manifesto pledges. We made those pledges when we were


fighting the election and we are now carrying out those pledges. The Budget will equip our country for the future. It delivers on our election promises and our priorities of education and health. I should have thought that the right hon. Gentleman would he pleased—possibly delighted—that we are allocating additional spending of £2.3 billion on schools and £1.2 billion on health, while ensuring that the Government reduce their borrowings.
The Budget shows that we are on message. We were on message throughout the election campaign and we are on message in fulfilling the commitments that we made during the campaign. We are translating those commitments into action. My right hon. Friend the Chancellor should be given credit for staying on message and for putting forward a positive plan that will reduce our deficits over a five-year period.
It must be heartening for the markets in seeking stability—in the emphasis that my right hon. Friend has placed on the global marketplace and the global village in which we now all live, and the emphasis on being competitive within that global marketplace—to know that there is a deficit reduction plan that will cut our borrowing to £5.4 billion next year, so that the Government borrow only to invest and not to fund consumption. I should have thought that the whole House could agree on those principles, not just the Leader of the Opposition or the leader of the Liberal Democrats.
It is difficult—we are all in this boat—to make a Budget speech when we have not seen the Budget. Therefore, I commiserate with both the Leader of the Opposition and the leader of the Liberal Democrats. However, we must look at not only the immediate impact of the Budget as we see it in the House, but the impact on the Bank of England and the financial markets.
One of my predecessors many years ago, Bob Woof—who is still with us, but no longer the Member of Parliament for Blaydon—used to make his Budget speech based on the previous year's Budget. That was helpful on the first day of the Budget. However, he might have had some difficulty with my right hon. Friend's Budget speech today as it was so refreshing and so very different from the Budget speeches of previous years.
Another famous Budget saying came from Iain Macleod. He said that the Budget depended not on the reaction on Budget day, but on how it looked in six months' time. In this soundbite age, however, what matters is how the Bank of England and the financial markets react now. The financial markets have been betting that, following the Budget, interest rates would go up and, consequently, that the value of the pound would go up. I believe that, with his swingeing taxes on cigarettes and petrol, my right hon. Friend has sufficiently attacked consumer spending and taken enough money out of the economy to make the Bank of England carefully consider whether it should raise interest rates.
The financial markets might wish to take into account the fact that if interest rates do not go up, the value of the pound should not go up either. One of the difficulties at this time is that the pound has risen by about 27 per cent. against the deutschmark, by 26 per cent. against the French franc, and by 30 per cent. against the peseta. My right hon. Friend said that it had appreciated by 18 per cent. overall. That has had, and will continue to

have, some impact on our exporters, on our industry and, therefore, on those who are employed by industry. That is likely to be a difficulty which we shall face if the value of the pound continues to rise.
My right hon. Friend said, rightly, that we are within the convergence criteria of the Maastricht treaty. In fact, we shall be one of the few nation states that can meet that criteria. Therefore, the question of a single currency follows on from the Budget today. Do we enter the single currency in the first wave? If we do, when do we lift the opt-out clause? Will it be lifted in the autumn? Certainly, it will have to be lifted by the end of the year. If we do not join the single currency in the first wave, what will the exchange rate be against the new euro? Will we have a floating exchange rate? How will that impact on our exporters, our manufacturers and our industry? Those are the major questions being asked by our exporters. However, a currency that appreciates, as ours has, does bring certain benefits to the economy—for example, it plays a role in reducing inflation.
I notice that the shadow Chancellor, in a pre-Budget statement, said that interest rates rather than taxes should rise. It is an odd view to take of the economy. This Budget should keep interest rates down. There should not be a substantial rise in interest rates when the Bank of England next meets. Similarly, the Budget should not result in a higher value being placed on the pound.
As my right hon. Friend the Chancellor said, this is a people's Budget. He has placed emphasis on education, health and getting people into work. He has shifted the emphasis from that in previous Budgets. This is the 14th Budget statement to which I have listened and it is certainly the most refreshing. I like this Budget and I am sure that the people will also like it.
I want to make one final point on the Budget and place it in the context of George Orwell's "Animal Farm". In that book, the pigs took over the farm, the pigs took over the farmhouse and the pigs ended up in the beds. There must have been a great temptation for the new Ministers to take the red boxes, to take the chauffeur-driven cars—although not limousines—to take the ministerial chairs and to continue where the last Government left off. It was encouraging when my right hon. Friend the Chancellor did not don a white tie and tails to go to Mansion House. He has not used Gladstone's old tattered box for his Budget. He came to the House with a new box and a new Budget speech that will be welcomed by the people, as it will be welcomed by the House. It is a Budget which gives us a fresh start and fresh hope.

Sir Michael Spicer: In straight economic terms, there is no point in the Budget. By common agreement—the Chancellor made that point several times—the British economy is in extraordinarily good shape. We have a high rate of growth, both historically and compared with other countries—3.5 per cent. and projected to go forward at that rate—and a very low inflation rate, again historically and compared with other countries. Presumably, therefore, there is only one point to the Budget—to stamp socialism back on to our economy and into our society—[Interruption.]
I think that I heard the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) say, "If only that were true" or words to that effect. I assure the


hon. Lady that, despite new Labour rhetoric, this is a socialist Budget: it could not have been introduced by a Conservative Government for at least two reasons. First, it is a high tax Budget. I counted six—other hon. Members may have counted more—new tax rises, which is almost a third of the way towards the 22 rises that we were meant to have introduced during our last period of office. The Labour party is on track to catch up and no doubt overtake us on the rate of tax increases.
Secondly and more particularly, it is a profligate Budget in terms of public spending. As far as I can tell, it spends the entirety of the reserves. We have a £4.5 billion reserve commitment. Far from the Budget filling any black holes or being in the tight grip of an iron Chancellor, it is the reverse. It is a classic, political somersault trick: the rhetoric has been about tight money and improving the Budget deficit, but the Government have spent the entirety of the reserves and have made specific commitments.
The Budget received great cheers from Labour Members: if I were a socialist, I would cheer a profligate Budget. The only way in which the Government try to match that profligacy is through the windfall tax. I assume that it is a one-off tax, but perhaps we should try to obtain further assurances on that. It is a massive increase in taxation: it is a one-off £4.8 billion tax on the basis of which public spending plans and trends have been developed. Anyone who has had anything to do with government knows that it is the ultimate in profligacy and irresponsibility to put public spending trends in place, as they have been in the Budget, and to back them with a one-off tax. I am sure that that is what the Budget will turn out to be.
As has been said, the British economy is in extremely good shape at the moment. The Government have inherited an economy that is moving in a strong direction and is the envy of every country in Europe. Every country in Europe thinks that we were mad to change our Government.

Mr. Desmond Swayne: We were mad.

Sir Michael Spicer: Of course we were, but we did so and, as a result, we have a socialist Government who have marked out their intention to change course. The tragedy is that, as with all socialist Governments, that course will now be downhill. The Conservative Government built up a strong economy, but it is as clear as night follows day that it will now start to deteriorate. That will not happen immediately, because it is currently moving at a fast pace, and it is difficult to turn around a great economy, but it will happen in the classic way.
The Government have introduced socialist policies—they will be defined as such very quickly by commentators and by those who invest in this country and whose confidence we need to gain. As with every socialist Government we have had—the good news is that they do not last very long, but the bad news is that we have this one for four or five years—the confidence of people who bring their money to this country and who invest in jobs begins to go.
There has been much talk of subsidised jobs. My right hon. Friend the Leader of the Opposition made exactly the right point. Job creation comes through people having

the confidence to invest their money in this country. That confidence will quickly be sapped as a result of the dogmatic change of direction that we witnessed in the Budget. The precedents of previous socialist regimes will be repeated.
People who want to put money into this country will start to lose confidence, and that will put pressure on the pound sterling. At the moment, it is exactly the other way round, so there will be a period when the problem will be disguised, but a time will come when the Government will be concerned about pressure on our currency, as Labour Government always are. I cannot put a figure on the time that it will take, but in about 12 or 18 months the Labour Administration will start to panic as pressure is brought to bear and money is taken out of the country. They will scratch their heads and wonder what on earth to do.
The first thing the Government will do is to try to put up interest rates. The tragedy will be that that rise in interest rates—if it is in 18 months—will coincide with the point in our natural economic cycle at which it would be sensible to bring interest rates down. Because of the growing lack of confidence in our currency and our economy, interest rates will start to rise. The Government will consciously increase them: it happens every time. As a result, the pound will not strengthen. The reason why the pound will be under pressure at that point will have nothing to do with interest rates. We all saw what happened in the last days under the exchange rate mechanism. On that ghastly morning, we increased interest rates to 25 per cent. I think—I cannot remember the figure. [HON. MEMBERS: "Fifteen per cent."] They were raised to 15 per cent., but it had no effect on the value of our currency. Confidence is what counts.

Mr. Hilton Dawson: Will the hon. Gentleman take note of the comments of the right hon. Member for Yeovil (Mr. Ashdown) and give us his reaction to the cut in corporation tax and the assistance given to firms wanting to invest in jobs and capital development? The clear message from small and medium enterprises in my constituency is, "Give us tax relief to allow us to invest and create jobs."

Sir Michael Spicer: I shall come on to that point. No one disputes that it is a good idea to lower specific taxes on the industrial sector. Under a Labour Government, in the ghastly, nightmarish scenario that has precedents in history, interest rates are raised. While having no effect on the pound, that will have an impact on unemployment. An emergency Cabinet then meets and discusses the problem that is particularly painful for a Labour Government: not the falling unemployment that we had throughout the previous Conservative Administration, which will no doubt continue while our policies continue to have an effect, but a rise in unemployment.
A rise in unemployment always happens under a socialist Government as a result of a combination of high interest rates and falling confidence. It affects the economy, and at that point the Government scratch their heads and hold an emergency Cabinet meeting. They say, "We can't go on like this. We shall have to have job schemes." The Budget contains the seeds of such schemes.
Job schemes are about picking particular industries for particular treatment—in the Budget, the Government have picked the film industry—and supporting them with


taxpayers' money, whereas what industry requires is the maintenance of a general level of confidence. Higher taxes and less confidence means that the spiral has begun: that happens under every Labour Administration. Today, the seeds of a totally new philosophy have been planted which will set the country on a downward spiral, as opposed to the strong trend of the past four or five years that the Labour party inherited.
I suspect that, this time round, when job schemes do not work and confidence is lost, refuge will be sought in joining the single European currency. The Chancellor was happy to say that we shall meet the Maastricht criteria on debt. I have no doubt that, somewhere along the line in the next two or three years, as confidence is lost, interest rates go up, unemployment goes up and job schemes have been tried, refuge will be sought in a single currency. I am glad to say that my right hon. Friend the Leader of the Opposition has given notice that that will be vigorously opposed. For Britain, the single currency means not just economic degradation but political degradation.

Mr. Geoffrey Clifton-Brown: My hon. Friend has already referred to the exchange rate mechanism debacle. If the scenario that he outlines continues and the pound remains at its present rate or even higher, would we not be risking a repeat of what happened before?

Sir Michael Spicer: As I am sure my hon. Friend knows, my view is that we should not enter the single currency as a matter of principle. There is no such thing as a right rate for the single currency. The single currency is, by law, for ever, and what is the right rate on day one might be the wrong rate on day two. The whole point about the exchange rate is that it reflects the economic circumstances at any one point. That is the essence of the argument against the single currency. However, the House will not wish me to detain it on that. No doubt, we shall have another opportunity to debate the single currency and Europe, and other wonderful things.
I simply end by saying that the Budget marks the beginnings of a tragedy for Britain. We are seeing the turning of the tide. The Labour party will no doubt cheer at this profligacy. If I were a member of the Labour party, I would, too. For Labour Members, it is a wonderful socialist Budget, but it is potentially disastrous for Britain. We are seeing the beginnings of a new trend in the way in which we are to be governed. On historical precedents, in two or three years' time, disaster will begin to befall our country. It is a terrible shame because, at last, the country was on the right track economically and other countries envied it. In two or three years' time, all that will be at nought.

Mr. Alan W. Williams: The Budget analysis of the hon. Member for West Worcestershire (Sir M. Spicer) is very different from my own. I want to correct him on two factual points. He said that we would be spending all the continency reserve, but in fact the majority of that £5 billion is, in the Chancellor's words, to be retained. The hon. Gentleman also said that we would be profligate with public

expenditure and borrowing, but the public sector borrowing requirement, as revised in today's Budget, will be £13.25 billion this financial year and £5.5 billion next year—down to less than 1 per cent. of gross domestic product.
If I have one criticism of the Budget, it is that it is far too restrictive or deflationary in its second year. I cannot quite understand why we need a PSBR to be that low. I hope that the Chancellor may have in mind that next year it will allow him some slack for additional public expenditure in the services that desperately need such spending.
My only other comment is that the hon. Gentleman seemed to anticipate a terrific run on the pound at some stage in the next 12 or 18 months. He was full of the doomsday scenario now that we have a Labour Government with a huge majority. To be honest, I wish that there would be a run on the pound, given its tremendous appreciation in value in the past year—up 26 per cent. against the deutschmark and the French franc. It is dramatically overvalued. The backdrop to today's Budget is the stupendous rise in the Financial Times index yesterday of over 100 points. That does not tally with the kind of scenario that the hon. Gentleman presents.

Sir Michael Spicer: So that there is no confusion here, I said clearly that, as a result of the previous Government, we now have a strong economy. What I am worried about is that being tossed away in the next two or three years.

Mr. Williams: I do not think that that will happen, certainly not while it is in the hands of our present Chancellor. He is extremely competent. He has shown great ability in opposition during the past live or seven years in his handling of the various economic groups. The basis that he has laid this afternoon in his Budget speech will see us very well over the next several years.
The Budget tallies with what we promised the electorate during the election campaign in April. I am particularly delighted with the windfall tax. It was worked out over many years and any complaints that the Opposition or shareholders may have about it have been discounted in share prices over many years. American companies have in no way been dissuaded from coming in and picking up the electricity companies one by one, despite their full knowledge that the windfall tax was coming.
The windfall tax will raise about £5 billion and is thoroughly justified. The electricity, water and gas industries were sold off at a terrific discount and the profits that they have made at the expense of the ordinary consumer have been a rip off. Anyone who invested £1,000 in those companies on privatisation will have seen their money treble over the years. If anything, the £5 billion is modest in terms of recouping some of the windfall gains made by investors in the privatised industries.
That money will be magnificently redistributed to the unemployed. It will pull people from welfare into work. It will reach every deprived community in Britain, whether they be in old mining valleys, as in my constituency, or in the regions, in Scotland, the north-east or wherever. The poorest parts will benefit the most because that is where unemployment is highest. Therefore, the social justification of the windfall tax is absolute.
I acknowledge that there are tax increases in the Budget. They are necessary because, as the hon. Member for West Worcestershire said, the economy is booming. The curious thing is that the previous Chancellor put in train a pre-election boom, but, because confidence was so low, it took two or three years for the economy to kick off in any kind of way. The pre-election boom, has landed about six months too late for the Conservative party.
There is far too much money around in that boom and it had to be taken out of the economy. House prices are up 10 or 11 per cent. in the past year and retail sales are up about 7 per cent. The building society pay-outs from demutualisation mean that about £30 billion will be coming into the economy to be spent. With such pressure, it was necessary to take money out of the economy. My hope was that this afternoon's Budget would take about £7 billion out of the economy. As I understand it, about £5 billion is being taken out. That is justified for the sake of the economy's long-term health. It will largely be used to cut borrowing.
I was pleased that the Chancellor, towards the end of his comments, told us that next year there would be more money for the health service and education—£1.2 billion to patient care, and £1 billion to schools. That £1.2 billion means an additional 3 per cent. for the NHS budget. However, I think that a crisis is coming in the NHS this winter and we may well find that, as we approach November or December, our trusts and health authorities will need some extra money.
I shall make a few comments about the value of the pound. The massive appreciation in the past year has made it unsustainable at its present level. The pound has risen 26 per cent. against the deutschmark, which means that our goods in Germany are now 26 per cent. more expensive, whereas German and French products in our market are that much cheaper.
There is a time lag between devaluation or revaluation and the economic effects working through. The pound is now at pre-Black Wednesday values, and it was the devaluation on Black Wednesday and in the following few months that brought recovery in the past two or three years. The converse of that is that if the pound stays at its present value for any sustained period, it will cause us problems two or three years down the line.
Like my hon. Friend the Member for Middlesbrough (Mr. Bell), I hope that taking out £5.5 billion from the economy today will be enough to stop interest rates rising, and the pound with them.

Mr. William Ross: Does the hon. Gentleman agree that all that so-called Black Wednesday did was to restore the currency to its true value on the international market?

Mr. Williams: I think so. That allowed us to cut interest rates dramatically, which is how the recovery got under way. The clear danger now is that, the pound having gone back up to Black Wednesday levels, at something like DM2.90, that cannot be sustained.
In general, I welcome the measures in the Budget, especially the windfall tax and what that will do to unemployment, as well as the special announcements on health and education. My only criticism is that, looking forward one or two years to a public sector borrowing requirement of only £5.5 billion, I think that our iron

Chancellor is proving just a bit too cautious, or too tough, with his money. I hope that, in 12 months' time, he will allow a little more laxity, especially towards our public services.

Mr. Richard Spring: I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity to speak this evening. The Chancellor of the Exchequer talked about his desire for the British economy to be part of the new fast-changing global economy. Nobody could disagree with those sentiments.
However, the fact is that the Government have been bequeathed a unique dowry—probably never equalled at any time in the history of the 20th century. In contrast to what has happened time and again in previous economic recoveries, we have steady prices, our balance of payments is under control, and we have falling unemployment and a falling public sector borrowing requirement.
I note, for example, that Barclays Economic Review for the second quarter of 1997 sums up the United Kingdom economy thus:
The incoming Labour Government has inherited a very favourable set of economic circumstances, with output growth strengthening steadily since the middle of last year, the unemployment rate below 6 per cent. and the underlying rate of inflation within the target range of 2½ per cent. or less. Even the public finances have been better than expected, with the Public Sector Borrowing Requirement for the last financial year coming in £3.6 billion below the Treasury's November projection.
We know that the International Monetary Fund, too, has called the performance of the British economy enviable. In the latest Library research paper dated 1 July, the following comment on our Budget outlook appears:
The generally favourable set of economic indicators described in this Paper need little further explanation. The economy has continued to grow steadily with continued falls in the level of unemployment and historically low levels of inflation and interest rates.
The Budget is therefore something of a fundamental irrelevance. It has nothing to do with the good management of the long-term performance of the British economy, because that was already in place. I pay tribute to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who engineered the remarkable economic environment that we now have. It is a precious dowry that the Labour Government are fortunate to have secured from us.
Despite all the hints that we heard in the past few weeks about budgetary black holes, we know that although the Government searched for one they discovered nothing, even when one changed the projections for economic growth rates. There are no discernible inflationary pressures, such as those that characterised earlier economic recoveries. Before the election, we heard time and again about our so-called economic failure and our inability to reduce the Budget deficit or unemployment. Now, suddenly, we hear about the risk of overheating in the economy.
I repeat that the Chancellor's Budget has precious little to do with economic management and everything to do with the politics of the Labour party in government. Those of us who are especially interested in the subject of economics must never forget that, in economics, we are dealing with flesh and blood, with human beings and their hopes and aspirations, not with some kind of abstraction.
When I look at what has happened in my constituency, as elsewhere, and the dramatic transformation in the lives of so many people who live there, the figures speak for themselves. Five years ago, unemployment in Haverhill was 9.5 per cent. Now, it is 4.3 per cent. and falling. In Newmarket, the rate was 6.7 per cent.; now, it is 3.5 per cent. and falling. In the Bury St. Edmunds travel-to-work area, unemployment has fallen from 5.5 to 2.7 per cent.
Those falls in unemployment mean job opportunities and the realisation of hopes and aspirations throughout our country for hundreds of thousands of people—in contrast to what has happened in the other major industrial economies of Europe. When we consider the welfare-to-work programme announced by the Chancellor, we must remember that, according to the labour force survey, since autumn 1992 youth unemployment has fallen well beyond the 250,000 figure that the Chancellor mentioned when he first spoke of his desire to reduce unemployment among young people via a windfall tax.
We must ask ourselves the simple question: why has that happened in the United Kingdom when the performance of other countries has been so poor? What a tragedy for young people under 25 who live in Spain, 42 per cent. of whom are unemployed. In France, 29 per cent. of young people are unemployed, and in Italy, the figure is one in three. Even in Germany, there is a high level of disguised unemployment because of the operation of complex training programmes.
Moreover, the Budget is moving us closer and closer to the European economic and social model, which blindingly obviously is becoming a manifest failure, unable to deliver the economic performance that would mean jobs and prosperity, and the fulfilment of the hopes and aspirations of young people.
The other side of the coin of today's Budget includes the real views and policies of the Labour party. There is stakeholding—we heard nothing about that today—there is the introduction of the minimum wage and the signing of the social chapter, and there are new rights for unions. All of those are utterly irrelevant to the operation of a modern high-technology economy.
Just as many European countries have sought to fudge the criteria for the Maastricht ratification process as we move towards a single currency in continental Europe, so today we saw a fudge in the way in which the reserves were raided to find additional sums for health and education spending. We had a clear foretaste today of Labour's move away from the economic environment that has delivered jobs so successfully in the form of the windfall tax, which clearly discriminates against those companies that have to pay it. The welfare-to-work programme fails fundamentally to address long-term youth unemployment by failing to create enduring opportunities for employment. That is the main criticism of the plan—that, at the end of the day, there is no assurance that those jobs will be secure. All the other component elements of Labour's economic policy will certainly ensure that such opportunities will not be realised over a period of time.
If we look back to the 1950s and 1960s—when the mainstream of intellectual thinking in the Labour party arose—Governments, trade unions and industry across the

continent of Europe were formulating macro-economic policies, and it worked. The national cake grew. In the 1970s, however, we saw the beginning of oil shocks, inflation and the inability of our economy—and those in Europe—to adjust to the new reality of technology. We are seeing a dramatic change in the way our economy and our labour market operate. Labour has totally failed to understand the job creation process or the process of creating the competitive environment which enables jobs and employment to grow.
In the past 10 years, we have seen massive downsizing in large corporations and businesses across the industrialised world. Industry now organises itself in a different way. For example, Japanese car companies have come to this country with considerable success—they have out-sourced their supplies, raised quality and spread their activities around in a different way from the monoliths which operated 20 or 30 years ago. This process of fragmentation has gone on for some time, and the Government's macro-economic, social and economic model is certainly not fitted for it.
In my rural constituency, hundreds of people who are living at home are linked to businesses through the Internet, the fax and modern communications. The fragmentation process means that the Government's proposed model for the next few years will result in a failure to adjust to the high-technology modern structures of our economy which have created jobs successfully. In the next two years, things will begin to fail in this country and the Government will start to destroy the job creation process. Of that, I am absolutely confident. The previous Government were successful in keeping corporate taxation low, creating flexible labour markets and ensuring that rights were not given in a way that meant the right to the dole queue. The result was an unparalleled tidal wave of inward investment in this country.
I welcome the cut in small business corporation tax. In the context of the downsizing in our economy, it is in the smaller and smaller business operations where the jobs of the future will be formed. The small business community feel that it is crucial that their cash flow is improved. Because of exemptions and thresholds, many small businesses do not pay corporation tax at all.
One thing that was depressingly absent from the comments of the Chancellor was any reference to the real concern of many small businesses about what will happen to business taxes under the new Labour Government. During the general election campaign, we pledged to introduce a rateable value exemption of £1,000 for the purposes of the uniform business rate, which would have had a dramatic impact on the cash flows of small businesses. Instead of which, we have been promised the true horror of local business rate taxes. In the 1980s, this meant Labour-controlled, anti-business local authorities driving up business taxes and driving people into bankruptcy and unemployment. It is a matter of regret that that key area of small business activity was not even alluded to by the Chancellor today.
Another disappointing element is the cut in private insurance tax relief for medical purposes. Many of my elderly constituents value their access to private medicine, and many say that if abolition takes place, they will cease to take out private health insurance and will become dependent on the national health service. In this country, the percentage of spending in the health service in the private sector is significantly smaller than in virtually any


other country in Europe. It is a matter of regret that that is the case when so many collaborative relationships are developing between the private and public parts of the health service.

Mr. Martin O'Neill: Could the hon. Gentleman advise me as to what I should say to elderly constituents who have worked in textile mills and are in receipt of small pensions on which they have to pay income tax? Why should their income tax subsidise the better-off who can afford the kind of health insurance to which he refers and for which the premiums are large?

Mr. Spring: I fear that the hon. Gentleman's arithmetic is a little awry. If 200,000 elderly people come off private health insurance and start using the facilities of the health service, it will be an entirely different story. That will increase the tax burden for everybody—including the hon. Gentleman's constituents.
On green taxes, we must all be aware of the importance of preserving the environment and the legacy that we will pass to our children and grandchildren. It was announced today by the Chancellor that there is to be a substantial increase in fuel taxes, and this will have an impact in rural areas. But the importance of the environment in rural areas cannot be isolated. An increase in fuel taxes, and a roads programme that effectively prevents the proper repair and care of the roads system and potentially denies bypasses around rural villages, will mean that a different kind of environment is affected—our architectural heritage, which will be damaged by heavy traffic. That is a matter of regret and I hope that it will be remedied in due course. If we are to be sensitive about the environment, let us be sensitive about the impact on our architectural heritage of increasing fuel taxes in isolation and about the need for a high environmental quality in rural areas.
I wish to refer to the reduction of MIRAS. In my view, it would be desirable to consider the possibility of allowing first-time buyers—who need most help in the housing market—to have help directed to them, rather than a general phasing down which excludes that important group. We heard from the Chancellor today of his dedication to home ownership; such a system would be a powerful incentive for young people.
There is no escape from reality. The reality of this Budget is that, unless we have an economic environment that creates the parameters for the economy to continue to grow, all the best intentions in regard to reducing unemployment will certainly fail. Having listened carefully to what the Chancellor said today, I fear that, as we move inexorably away from the policies that brought about the remarkable economic success story that is the United Kingdom today and towards a European social and economic model—I am thinking of the link with Labour's other policies—that success story will end in tears.

Mr. Jim Murphy: Thank you, Mr. Deputy Speaker, for allowing me to make my maiden speech during the first Budget debate under a Labour Government for nearly two decades. I am delighted to have the opportunity to speak in such an important debate.
One thing that has struck me about the maiden speeches made so far by hon. Members on both sides of the House is the way in which those hon. Members have made their

constituencies sound like the type of place in which I would like to spend my summer recess. Although I do not promise to persuade the House that Eastwood is the tourist capital of the United Kingdom, I hope that I can at least match some of their eloquence and commitment.
Until 2 am on 2 May, Eastwood was the safest Conservative seat in Scotland, but I am glad to say that that is no longer the case. Eastwood, which I am privileged to represent, is made up of many unique and distinct villages and communities. Eaglesham is the picturesque conservation village, soon to benefit from a bypass. Neilston, Uplawmoor, Busby and Thornliebank are all distinct villages in their own right, with a distinct culture. Giffnock, Netherlee, Stamperland and Newton Mearns are prosperous suburban areas from which many people commute to Glasgow. Barrhead, an industrial town on the outskirts of the constituency, is resilient in bad times, innovative in good times and loyal to Labour throughout, and has a unique sense of local pride.
Eastwood's sense of community is added to by the number and variety of voluntary and civic organisations that are working determinedly, particularly those that are committed to working with the young, the elderly and the disabled. We are also fortunate to be served by two excellent local newspapers, the Barrhead News and the Eastwood Extra. Hundreds of small businesses in Eastwood employ more than 10,000 local people. They will welcome new Labour's new commitment to a fairer deal and lower taxes for small and medium businesses. Farmers in Eastwood will also welcome the new Government's plans for a clearer policy on agriculture, and their commitment to clearing up the BSE mess.
Like many of my colleagues, I believe that my constituency is much more than just the towns and villages that make it up. Its greatest asset is its people. Let me mention a few of them. Sir John Montgomerie, Lord of Eaglesham, fought the English at the battle of Otterburn in 1388; I am pleased to say that he was a member of the victorious army of the Earl of Douglas. John Shanks, who formed Shanks and Co. in 1852—it was based in Barrhead—is famous for the invention of the water closet.

Mr. Rhodri Morgan: That was Mr. Crapper.

Mr. Murphy: I will not respond to that sedentary intervention.
John Shanks's enduring contribution to all our lives is such that any hon. Member who visits any public convenience, even in the House of Commons, will be aware of his craftsmanship. Although Eastwood may not be the tourist centre of the United Kingdom, it is, perhaps, the most convenient area in the United Kingdom.
Other persons of note in Eastwood were the Crum brothers from Thornliebank who set up a printing company. They pre-empted by more than 100 years the current Prime Minister's commitment to the environment and ethical industries. Theirs was one of the first smoke-free factories. They employed a local doctor, and built local housing, schools and recreation facilities. Alexander Crum went on to become a Liberal Member of Parliament in 1880.
I want to pay tribute to my predecessor Allan Stewart, not simply because it is the customary thing to do but because it is the right thing to do. I often disagreed with


Allan Stewart's views, and in the early part of the election campaign we both rehearsed our arguments convincingly. Allan was always strong and strident in expressing his beliefs, regardless of which party they fitted and which arrangements he upset. Hon. Members will know that he has been through a difficult patch recently; I am pleased to say that he has now left hospital, and I am sure that the House will join me in sending best wishes to him and his family, and wishing him a full recovery.
Another of my predecessors, Robert Nicholl, was the only other Labour Member of Parliament for Eastwood. He was elected in 1922. A little-known fact is that he was the great-uncle of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton), who is present this evening. He had two great passions, for which he became renowned in the House. The first was campaigning for smaller classes in primary schools. In 1923, he spoke in the House in favour of reducing classes to 65 pupils or fewer, which gives some indication of the position at the time. Perhaps we have made some progress since then.
Robert Nicholl may have failed in his second important contribution. He campaigned in favour of brevity in Members' speeches. Although we have halved the size of primary school classes, I fear that in the intervening 75 years we have doubled the length of Members' speeches, although I have no intention of following that example this evening.
Robert Nicholl's tenure in Eastwood was short. He lasted only 23 months, and died at the age of 35 a few months after leaving the House. As the first Labour Member of Parliament for Eastwood for nearly three quarters of a century, I hope and expect to remain here a great deal longer than Mr. Nicholl. In that aim, I have an unexpected but welcome ally in the shape of the Scottish Conservative party, whose members, given their antics and divisions, seem intent on keeping me here for some time.
In the Scottish Conservative party, common sense now seems like a distant relative. Scottish Conservatives seem to believe that they lost the election simply because of the constitutional issue, but that is not the case. The contents of today's Budget bear more compelling testimony to their political impotence in Scotland than any constitutional debate. The Budget statement, to which we listened with great interest, set out an agenda for the 21st century. It is an entirely different type of Budget: a Budget for the many, not the few. At its core is the plan for a windfall levy, providing new opportunities for a new generation.
Many young people in my constituency, and in constituencies throughout the United Kingdom, have known only a Conservative Government. Eastwood has more young voters than any other constituency in Scotland and, for too long, for too many young people, politics has been a source of problems. As a consequence of the Budget, politics can at last begin to become a source of solutions in those young people's lives.
There are 25,000 young unemployed Scots, many of them long-term unemployed. Some have never worked in their lives—yet we hear from Conservative Members that we should not introduce a windfall levy to alleviate the problem. Scottish Power has made a profit of £1.9 billion

since privatisation. Labour Members believe that we should employ those excess profits to put young people in Scotland back to work.
My right hon. Friend the Chancellor talked extensively about pensioners and a fairer deal for them. There are more than 14,000 pensioners in Eastwood, and they will welcome his announcement of a reduction in value added tax on fuel. That will bring about real change in their lives.
The people of Eastwood and of Scotland in general will welcome our core agenda of the people's priorities of health, education and jobs—those were the issues on which I fought the general election campaign—and will be pleased to know that there is to be an extra £200 million for services in Scotland next year. Already, my right hon. Friend the Secretary of State for Scotland has announced that £9 million—additional money to provide additional services and facilities—will go towards Scotland's schools this year.
I believe that the excitement and energy surrounding this Labour Budget can challenge the creeping cynicism about politics and politicians among many young people and society as a whole; it can reignite enthusiasm and belief in the political process.
I welcome my right hon. Friend's encouragement to hon. Members of all parties to become champions of welfare to work. I encourage Conservative Members not to let their ideology get in the way of opportunity for young people throughout the country. I have said that some people think that politics are irrelevant and do not matter. If Conservative Members put their ideology before the future of our young people today and in the coming months, it will be they who matter even less.

Mr. Shaun Woodward: I congratulate the hon. Member for Eastwood (Mr. Murphy) on his maiden speech. I feel for you, Mr. Deputy Speaker, as I too am about to engage on that task. I am grateful to you for calling me to speak, but even more grateful to the electors of Witney who gave me the opportunity to do so.
I am aware that my remarks must be in the spirit and practice of the House in being uncontroversial. I must confess that, looking back on speeches not only by hon. Members in this Parliament but by Labour Members on previous occasions, the definition of uncontroversial seems to be increasingly relaxed.
I am fortunate to be able to pay tribute to two of my predecessors. Colonel Dodds-Parker is still very much with us, and I am extremely grateful to him for his kindness and encouragement. He was both a distinguished politician and a man of enormous courage and conviction, not least in the way he served his country for special operations during the war.
It is an especial pleasure for me to pay tribute to Douglas Hurd, who represented Witney for 23 years before standing down at the general election. Lloyd George said:
A politician is a person with whose politics you don't agree. If you agree with him, he is a statesman.
I am sure that no one in the House would have difficulty in recognising my predecessor, now Lord Hurd of Westwell, as a statesman.
It is difficult to praise too highly a man who has been a notable servant not only of the House but of the country. Tested in the highest offices—Northern Ireland Secretary, Home Secretary, Foreign Secretary—Douglas Hurd relentlessly demonstrated the skills of a diplomat, reformer and cunning negotiator. To paraphrase some remarks made recently about Colin Cowdrey, he has style and elegance at the crease and humility and concern for others off the field.
Douglas Hurd's crease has been not only the Dispatch Box but the forum of international negotiation. We are all aware of his humility off the field, and it is a considerable tribute to him that his concern and care for constituency responsibilities have played centre stage throughout his life. At a time when politics and politicians are not always held in the highest regard, he gives renewed definition to the concept of public service. It is not by chance that he has been a mentor to so many in the House.
Speaking of public service, I want to pay a special tribute to Chris Patten, the former Governor of Hong Kong. His determination to do not what was easy or expedient but what was right has ensured that Britain has discharged its responsibilities to the people of Hong Kong with honour, not obloquy. I am sure that all hon. Members will have been moved by the enormously high regard in which he was clearly held when he left Hong Kong on Monday. If hon. Members are able to offer a fraction of the public service that he has given, we will all be doing extremely well.
It is a tradition of the House to offer hon. Members a Cook's tour of one's constituency. I will not disappoint, but hon. Members may want to be spared an account of every one of its 82 villages and towns. The town of Witney nestles in the heart of West Oxfordshire. It is a seat marked by history, tradition and commitment to innovation: fitting themes when we consider the implications of today's Budget statement.
Many hon. Members will be familiar with the towns in my constituency, not least Burford and Woodstock. I trust that many will have visited the area; tourism is one of the most important industries in West Oxfordshire. Indeed, it was from the borough of Woodstock and Burford that the electors of 1640 returned Speaker Lenthall, who was of course a keen defender of the rights of Parliament and would surely have had strong views about the Budget leaks to the press.
Tradition and evolution, two watchwords of Conservatism, are a way of life in West Oxfordshire. The importance of the rural economy, of farming, and of those who are the stewards of our countryside, is of equal value today as it was when Speaker Lenthall was elected more than 350 years ago. The landscape has evolved as a product of a vital partnership between the land and those who care for it.
My constituents regard themselves as living in a rural community and are wary of those who would seek to impose on their way of life a set of urban values. It was Disraeli who warned of political parties that:
attack the institutions of the country under the name of reform, and make war on the manners and customs of the people of this country under the pretext of progress.
There is a view that recent moves in the name of progress and reform to prohibit the legitimate pursuit of country sports are not only ill considered but a reflection of those who do not understand why our countryside takes the shape and form that it does.
The enormous environmental, economic and employment consequences, about which the Chancellor has had so much to say today, that will, none the less, result from a ban on hunting, concern many in my constituency. I do not hunt, but I have become aware of the role that hunting plays in the life of the people of West Oxfordshire.
Our hunt keeps bridleways open, maintains hedges and fences, and plants and manages woodland. For example, on one farm alone in the Heythrop hunting country of Oxfordshire, 12 acres of covets and three miles of hedgerows have been established around arable fields. That would not have happened without hunting.
Those developments have led directly to the development of important new wildlife habitats that enhance and benefit native species. It is hard to predict how the landscape would change under the absence of hunting interests, but the risks are all too clear. Taking risks, many of them not properly calculated, is something that the Government have been prepared to do at every opportunity. I urge them to think hard before taking risks that will destroy our natural heritage.
Witney is a spirited example of the importance to our economy of innovation and enterprise. It is therefore fitting that I am able to address the House on the day of the Budget. Witney enjoys one of the lowest unemployment records in the country, at about 1½ per cent. It need not have been such a success story, but enterprise and the determination to succeed have led to an extraordinary transformation in the employment prospects for my constituents.
Amid its idyllic countryside, Witney sports some of the most advanced industries in the United Kingdom today: firms such as Oxford Instruments and Objex Electronics. Business parks abound, and scores of small and medium-sized enterprises are set up every month. It is a legitimate exercise for my constituents to ask what the Budget will do for them.
I have said that I will try to keep my remarks uncontroversial, but as the Prime Minister said in his maiden speech:
You may wonder, Mr. Speaker, why, contrary to tradition, some maiden speeches have been controversial. Perhaps it is pertinent to ask in what sense they can be controversial … What impels us to speak our minds is the sense of urgency."—[Offical Report, 6 July 1983; Vol. 45, c. 315.]
It is a sense of urgency that impels me to speak. This Government have three modes of procedure. The first is that of precipitate haste, demonstrated by the manner in which operational control of interest rates was gifted to the Bank of England without consultation in the House. The second is that of recurring reference to working parties and reviews. The third mode, as we have seen strikingly illustrated today, is by leaking to the press before coming to the House. It is a shame that the high moral tone adopted by Labour Members in opposition was not carried forward when they moved into government.
As for the Budget leaks today, if it is proven that they came from Treasury officials, hon. Members will undoubtedly look forward to what action the Government will take. Will they, like Dalton, recognise that they
must make full and frank admission
of their responsibility—
and express … apologies to the House."?
I fear that they will not.
Today's Budget undoubtedly falls into the category of precipitate haste. I do not know whether Labour Members have had the opportunity to read the excellent play by David Hare, "The Absence of War". The would-be Prime Minister tells his spin doctor
A politician can only deal with his inheritance. With the situation as it arrives.
The constituents of Witney are at a loss to understand why the Labour Government need an emergency Budget when, according to just about every economic indicator available, their inheritance demonstrates that in the past 40 years Britain has never had it so good. Unemployment is falling, taxes are down, interest rates are down, mortgage levels are down, and growth rates are being continually revised upwards.
The Chancellor may have come to the House with a brand spanking new Budget box, but it was still red, and it was a box of old Labour tricks, albeit with a hint of new Labour characteristics.
Of course, we welcome the cuts in corporation tax, which the Chancellor said were made to ensure that the United Kingdom was the number one destination for foreign investment. I am awfully sorry to tell him that it already is the number one destination.
There have been all kinds of pretext for the changes that have been made today. Under the pretext of stability, progress, and in the name of reform, the Budget has at its centrepiece, like all Labour Budgets before it, the desire to raise taxes. It has introduced at least 10 new taxes—if we count the windfall tax as a single tax.
At best, Labour has breached the spirit of its general election pledge not to increase the tax burden on the middle classes. The urgency, the emergency today, is one manufactured at No. 11 Downing street. There is no emergency. Such a state exists only because the Chancellor has told us that he must have an emergency Budget. There are times when one is necessary; we needed one in 1979 because the country was broke. Then, tax rates were at 83 per cent. and 33 per cent. and inflation was out of control.
Those are not the circumstances of today, so how does Labour deal with its inheritance? It deals with it by raising taxes in the name of welfare to work, which is a perfectly laudable and proper aim, but how does it plan to achieve that end? By tax—an indiscriminate and unfair tax since almost none of it will be paid by the corporate sector, because one way or another the windfall tax will be passed on to consumers, ordinary people. It will hit pensioners extremely hard. In fact, 24 million households will find themselves paying an extra £200 a year for that new tax. That will, of course, hit pensioner households harder than anyone else because their incomes tend to be lower. Many of the shares of the companies that have been taxed today are held in some form by pensioners. The logic of the tax disguises the focus of its attack—the most vulnerable in our society. It is misguided, unfair and it is ordinary people who will suffer the most. Like all tax, it will hurt.
The changes announced to advance corporation tax represent yet another step by which everyone who was led to believe that Labour would not raise taxes will now realise that he was misled. Labour's plans will create

instability in the pension market and see the transfer of investment out of the United Kingdom. It will undoubtedly lead to individuals picking up the bill.
Far from the Chancellor's claim that the Budget concentrates on laying the foundations of tomorrow's wealth, it lays the foundations for dismantling Britain's wealth creation. That tax change, far from encouraging a long-term perspective in business investment, as Labour maintains, will simply increase the cost of capital for investment financed by new equity and will increase the overall level of taxation. The tax, ironically, reduces the investment that the Chancellor said that he was so keen to increase.
Other new taxes were also announced. Taxes will be imposed on those who would own their own homes. People will be taxed when they buy a home, through increased stamp duty. They will be taxed when they try to pay for their home because the level of mortgage interest relief at source will also be reduced. Tax on petrol will be a particular blow to the people of Witney and all those who live in rural communities.
This political Budget is not justified by a squandered inheritance, such as we found in 1979. This Budget was, however, utterly predictable—even if it had not been leaked—and its spirit runs according to the true vein of old Labour. The public were led to believe that there would be no new taxes. Small businesses were led to believe that Labour would understand their needs. Large companies were led to believe that Labour was a safe option and would not interfere. Yet in every pore and sinew of the Budget, Labour has shown its basic instinct: to tax and tax again. Ten new taxes will raise £10 billion. That has not been done because the Government are trying to protect the country in a recession. We raised taxes to protect public services, but the Budget reveals good old Labour policies of tax and spend. If the Labour Government will put up taxes now, when the economy is doing this well, what the heck will they do when the economy meets a downturn?
The Labour party, this new Labour party, may have abandoned the heady aspirations it had when it last enjoyed such a substantial majority in 1945. It may be extremely arrogant and smug at the moment. Collectivism has been banished, but new Labour is no longer the intellectual powerhouse for socialist beliefs. Today is not the brave new world to which the electors looked forward or the new Jerusalem that they were led to expect; instead, we have witnessed the beginning of a return to the misery of tax, spend and subsidy. It is a Budget for deferred misery.
I am a Conservative because I believe that, at its best, Conservatism is the most effective way in which to create real opportunity, real jobs and a better way of life for our country. In practice, socialism, despite its virtuous ideals, has always resulted in a levelling down. In the name of reform, it undermines stability. In the name of progress, it undermines achievement.
Today's Budget does little to build on the stability that Britain has created or to enhance the achievements of our people in the past 18 years. The Chancellor says that it is a Budget for investment, work and for the future, but the train that left the platform this afternoon is inherently unstable. The Budget will create artificial jobs and throw many out of work. It institutes subsidy in place of enterprise and competition. It has at its heart the instinct of tax and tax again.
That the Labour party spent the election assuring the public that Britain had had enough of tax rises was like the kettle calling the pot black. Its prospectus and its statements today have revealed that that was not the case. Today, we see the value of those assurances. We can only predict that, like all houses built on sand, the economy will become inherently unstable.

Ms Diane Abbott: There was much to welcome in the Budget. Any remaining Conservative supporters who heard the pathetic attempts of the Conservative party in Parliament to criticise it with bogus allegations of leaks would be forced to weep. It is a sign of how low the party has sunk that it is unable to mount a sustained, serious attack on the Budget.
I want to discuss reform of the welfare state, which is probably the most important Budget theme for people who live in inner-city constituencies such as mine. My right hon. Friend the Chancellor of the Exchequer made much in his excellent speech of his aspiration to build a welfare state for the 21st century. No one who has had dealings with the welfare state, whether as a claimant or through trying to help claimants, could deny that it is creaking and in urgent need of overhaul. It is degrading, inefficient and laden with bureaucracy. We can all think of ways in which it could be reformed and of improvements in the way in which we deliver benefits. To cite one, the Benefits Agency has had a series of targets imposed on it by Government. A benefit take-up target is long overdue. How can it call itself effective if it does not ensure as near 100 per cent. take-up as possible? Some benefits have a very low take-up rate.
I want to focus on the programmes that have been heralded today. First, there are my right hon. Friend's plans for lone parents. Much of the political debate about what politicians and society should do about lone parents is based on a body of prejudice and misinformation. The prejudiced and biased way in which the media have presented the debate down the years has meant that an unnecessarily and misleadingly mechanistic model of why young women become lone parents has seeped into the political consciousness. It has almost become the accepted wisdom that women become lone parents of their own free will, to get extra benefits and a new council flat. My constituency may have the largest proportion of single parents in the country, and anyone who thinks that women become single parents to get council flats should see some of the ones that they occupy in Hackney.
The argument that women become single parents to get extra benefits—if it is not made by Conservative Members, it is often put by the tabloid press—asks us to accept that when young men and women get together on Saturday night and Sunday morning, the key factor in their decision whether to have sex is the thought that if the woman gets pregnant, she will get an extra £6.50 a week income support. Stated in those bald terms, the proposition is absurd. I make that point because if we fall prey to a mechanistic model of why women in the inner-city areas of Hackney, Manchester, Glasgow and the north-east become single parents, there is a danger that we shall fall prey to the reverse analysis that if we take away benefit, women will either not have children or will rush out to work.
I warn the House that I shall make this point over and over again in this Parliament. The reasons why poor young women in the inner city become single parents over and over again, often by different men, are complex and are not subject to mechanistic remedies, whether through the benefits system or through the welfare system. They have children because they are careless. Members of Parliament are not people to lecture others about being careless about sex. Single mothers have children because they believe that this time, the man will stay. A single mother may do it because she feels that if she has the child and dresses it up in the best that Mothercare can sell, she may, for the first time in her life, be someone. That may seen silly to hon. Members on the green leather Benches of this august Chamber, but unless we as legislators try genuinely to understand social conditions in the inner city and what drives young women to have, and keep having, children, we shall never address the problem.
My right hon. Friend the Chancellor's proposals include a package of help for lone parents. We are offering them special interviews, access to the Internet for more information about jobs, fast-track help with family credit and the Child Support Agency, 50,000 training places, after-school clubs funded by lottery money and more money for the CSA.
I object to none of those things in themselves, but let us be clear. It would be unfortunate if the Government got carried away by the assumption that young single-parent mothers do not go out to work because they do not know how much better off they would be if they did. A young single-parent mother has only to turn on the television or experience her child coming back from school and asking for trainers that cost the equivalent of a week's benefit to know how much better off she would be if she worked. While I do not decry or oppose giving single mothers interviews or having them sit in front of the computers so that they can find jobs on the Internet, the fundamental cause of their not going out to work is not lack of understanding of how much better off they and their children would be if they worked, but issues such as child care.
Let us consider some of the other remedies advanced by my right hon. Friend the Chancellor. The information presented with the Budget talks about giving single-parent mothers who go to special interviews fast-track help with family credit and the Child Support Agency. If it is possible to speed up such access for some single-parent mothers, we should in justice and fairness, speed it up for everyone. It is not fair to offer swift and efficient service to some people, who will go through the rigmarole of interviews sitting in front of a computer and plugging into the Internet, while offering a slow process to others.
We also talk about making 50,000 training places available for child care workers. I am not opposed to that, but again I put it to the Government that the problem with child care, and I speak with some feeling having brought up a child on my own for the past five years and nine months, is not a lack of trained child care workers, but the lack of availability of child care facilities, whether in the workplace or in the community. Training people for jobs in nurseries that have not been built or whose fees my constituents could not afford to pay will not meet the needs of my constituents. We also talk about giving extra money to the Child Support Agency. That is fine and will help some mothers, but it specifically will not help mothers on benefit.
There is nothing in the package that I disagree with, but until the economy or Treasury thinking reaches a point where we are prepared to put real money into a genuine national strategy to produce affordable child care, we shall still have the problem of lone mothers being out of work, not because they are lazy or want to watch daytime television rather than working, but partly because the jobs are not there and partly because of problems with child care.
My hon. Friends have talked about after-school clubs; they are all well and good, but, as I know, they do not help in the holidays. The poorest single mothers will enter the work force and find jobs in shops and service industries that involve working nights and split shifts; it is precisely those single mothers who need elaborate child care arrangements. I do not see how after-school clubs will, in themselves, meet the child care needs of women who are increasingly working in retail, cleaning and service industries in which they are required to work nights, or strange shifts involving two days one week and one day another week. No normal nursery can meet those requirements.
I should be happy to stand here today and say that the measures outlined in the Budget will meet the child care needs of my constituents this year, next year or even within the five-year parliamentary term, but meeting the child care requirements of the poorest women such as those I represent in Hackney requires more money and more thought than has been forthcoming today. As the labour market becomes more complex, so women's child care needs become more complex.
Alongside the package of measures introduced today with much fanfare are the documents that go with the Budget. As I read them, I discover that we plan to go ahead with the cut in the lone parent family premium. We also plan to go ahead and cut the special rate of child benefit for lone parents. I very much regret that we have not felt able to reverse those Tory measures, which were so widely condemned by all the voluntary groups and all the groups that work with single parents. We shall achieve nothing by allowing single parents to remain poor.
I know that Conservative Members do not agree, but the reason for the supplement for single parents on income support and the reason for the special child benefit rate for single parents is that it is more expensive to be a single parent. If we cut the special money for single parents as we plan to do, we shall be forcing single-parent mothers into poverty. It would have been better if we had allowed our positive measures for single parents to kick in before we went ahead and implemented the Tory cuts.
Conservative Members have a lot to say about the glorious way in which they handled the economy and their marvellous economic legacy. It was a marvellous legacy for some, but many people, including many of my constituents, were left out of the economic legacy. Of course, I support my right hon. Friend the Chancellor's proposals for growth and his support for business, but I do not want a society in which the gulf between my constituents in Hackney and the people who did well out of the Tory years grows wider.
I also wish to mention the welfare-to-work package as it impacts on young people. I welcome the proposals: youth unemployment is one of the most serious problems

facing us in Britain today. But the proposals need much thought and work. The House—certainly Labour Members—will not need me to point out that the evidence shows that when one tries to deal with unemployment by offering employers subsidies, those employers, if allowed, simply substitute existing jobs for jobs for which they can receive a subsidy. I want my hon. Friends at the Treasury to introduce concrete measures to ensure that employer subsidies do not result in job substitution.
The welfare-to-work proposals must ensure that black and ethnic minority youngsters get their fair share of jobs—that is important for inner-city areas. In inner London, two thirds of young males between the ages of 18 and 25 are unemployed. That has serious implications for the fabric of society, the breakdown of families and issues such as crime. Those youngsters will not get back into work simply by wishing it; structural measures will have to be in place so that every facet of the welfare-to-work programme—whether it is the employer base, the voluntary sector or the training element—contains justice and equal opportunities for all our young people.
As we approach the millennium, we must all agree that our welfare state needs reforming. However, we can have an effective welfare-to-work system or we can save money; we cannot have both. Occasionally I get the impression that some of my hon. Friends think that welfare to work is an easy way of containing the welfare bill. Genuine welfare to work, as demonstrated in the United States and other countries, costs more in the short term. As the months unfold and we put flesh on the measures in the Budget speech, it is important that we introduce the structural measures to meet the requirements that I have mentioned.
It would be tragic if, having been elected with the biggest majority this century, our only legacy in the area of welfare reform was to put through the cuts in expenditure that the Conservatives never had the courage to implement. I am all for genuine welfare reform, but it is not easy to implement genuine welfare reform and genuine welfare-to-work programmes. I hope that when my hon. Friends in the Treasury put the flesh on the bones of the proposals in the coming months, they will bear my comments in mind.

Mr. Brian Cotter: I welcome this opportunity to make my maiden speech in today's important Budget debate and I thank you, Mr. Deputy Speaker, for calling me. I congratulate the hon. Member for Eastwood (Mr. Murphy) on his interesting maiden speech and I can assure him that there are plenty of conveniences in Weston-super-Mare.
I pay tribute to my predecessor, Sir Jerry Wiggin, who represented Weston-super-Mare for 26 years. He was notable for his strong and uncompromising views and his tenacity in representing the constituency for that length of time. I should particularly mention Sir Jerry's long service; I am always ready to rise to a challenge and it will be my aim to reach or even surpass his achievement—God willing.
Weston-super-Mare has enormous charm, and I thoroughly recommend it to my colleagues in the House. It has a mixture of old charm and modern technology. The sea front is almost without modern high-rise buildings—


a rare thing now. It has a pier to rival any other, and many other attractive seaside features. We soon hope to attract even more money from tourists at a new casino—perhaps colleagues might care to have a dabble. A traditional yet forward-looking resort, it is one of the first in the country to get on to the Internet.
Weston-super-Mare is full of small businesses, with hotels, guest houses, a great variety of shops—many small and privately owned—manufacturing companies, distributors, and information technology and engineering firms. That is why I am particularly glad to be the Liberal Democrat small business spokesman, especially as I have a background as managing director of a small manufacturing company.
This Budget should be about strengthening the economy and creating jobs; I should like to plead the cause of small businesses. Small businesses account for nearly 40 per cent. of total United Kingdom turnover and employ 50 per cent. of the total private sector work force. If just one job were created in every small business, it would solve the unemployment problem overnight. I am especially glad to be making my maiden speech on business matters, because the previous Liberal Member of Parliament for Weston-super-Mare, Mr. Frank Murrell, was also in business; in his maiden speech on 30 May 1924, he spoke on industrial councils and about minimising unemployment—a subject still current today.
The small business field has had a tough time and now is the time to revitalise and support it. My colleagues and I warmly welcome the Government's proposed late payment Bill and I shall do all I can to work with the Government to ensure that a sound Bill is passed. That may help to answer the concern expressed earlier about cash flow in small businesses. Another approach we have long argued for is the establishment of regional development agencies—a proposal now in consultation. I am glad that one of the agencies' main aims will be to support the small business sector.
What do small businesses need that the Government or devolved agencies can provide? They need regionally based economic development and investment plans involving local people to provide opportunities for growth. Businesses need a fairer rating system, collected locally and with the receipts used locally. In the past, many attempts have been made to give support to, or establish schemes of various sorts for, small businesses, but, in my experience as a small business man, such schemes have frequently been short term and variable throughout the country. In addition, much money has been wasted by duplication of effort and vast bureaucracies and not enough has reached the intended point of delivery. That is why the whole of the past approach to giving the support and help that businesses need must be re-examined and slimmed down—concentrated, not duplicated. We need to use the best practice, one-stop-shop approach. A serious reassessment of the whole business support system is needed and I hope that the Government will consider doing that.
The Government must now realise that we are at an economic crossroads—a moment of decision when we can either push the economy forward or take a step back. It is not a difficult decision to make. It is now that we must capitalise on our skills and go up-market into high-value-added goods and high-skilled production. That means valuing our businesses, both large and small.
Large firms are shifting from being conglomerate businesses to being slimline enterprises, and small businesses are playing a bigger role as suppliers of specialist services. Small firms represent the bulk of employment in Great Britain, yet we are still failing to give them the structures and support that they need. Part of that support can be achieved by giving businesses stability. We have to reduce the short-termism in Britain's economic cycle. The handing over of some responsibility to the Bank of England is a step in the right direction, but we must also allow local authorities to raise private finance for investment in local communities.
Small businesses require stable and sustainable growth in a low-inflation environment, with an independent bank and a realistic inflation target. Long-term investment in this country's productive capabilities and responsible fiscal management are needed to ensure that that comes about. We can no longer put up with politically motivated tax cuts and the continuation of the boom-bust cycle. However, I welcome the investment help for small businesses announced in the Budget.
The Budget must be about creating stability in our economy and putting more money into things that matter—education and health. Hard decisions may have to be taken, but let us take them—the interests of the people of this country come first. For the sake of our future generations, we cannot squander the opportunity to get our education system back on track and to provide everybody with high-quality care.
However, today's Budget means that, once again, taxes are being raised by the back door. The windfall tax will inevitably hit consumers and pension fund holders; in addition, there is still a likelihood of higher council taxes. With the higher inflation forecast, that is a cause of great concern. We must also be concerned about the raiding of the contingency fund. Nevertheless, many of the intentions in the Budget are good and, with my small business hat on, I welcome the measures taken in that sector today.

Mrs. Ann Keen: Thank you, Mr. Deputy Speaker, for giving me the privilege of making my maiden speech on such a memorable day—the new Labour Government's Budget day. I am indeed honoured. I congratulate the hon. Member for Weston-super-Mare (Mr. Cotter) on most of his comments, especially those relating to small businesses, but I disagree with the latter part of his speech.
I start by thanking all the members of staff who work within the Palace of Westminster. They have welcomed all the new Members and I thank them for their patience, their knowledge and their—at times, much-needed—sense of humour. I congratulate every one of them. My hon. Friend the Member for Crawley (Laura Moffatt) and I are the first two nurses to enter the House of Commons as Members of Parliament, but we are, of course, not the first nurses to enter the Palace. Again, I congratulate my colleagues in the nursing profession who, for many years, have worked in the House of Commons caring for hon. Members.
I thank the people of Brentford and Isleworth for giving me the privilege and honour of representing them in the House. I am proud to have been the Labour candidate for Brentford and Isleworth in the 1987 and 1992 general elections, so it is a great honour that I am now here as the elected Member of Parliament.
It is traditional to refer to one's predecessors in one's maiden speech. When I first fought the seat in 1987, the constituency was represented by Sir Barney Hayhoe, now Lord Hayhoe, who represented the constituency for over 20 years and was well respected both in the House and in the constituency. He retired in 1992 and was followed by Nirj Deva. Now, I welcome this opportunity to represent my constituency and I look forward to being in the House for some time.
The constituency of Brentford and Isleworth is a diverse one, both culturally and economically. We celebrate that diversity and, having been the candidate and now the Member of Parliament, I have had the privilege of being welcomed into many cultures. I have much to learn, but I have been welcomed as a member of a family. What is so good about my constituency is that we are all one.
The constituency starts at Hounslow. It contains the great international airport at Heathrow and I look forward to an integrated transport system that will get many of my colleagues out of Heathrow and into our great capital city with far greater ease than has hitherto been the case. It contains the historic town of Isleworth as well as Osterley, Brentford, where I am a resident, and Chiswick. We have many great parks—Syon park, Osterley park, Chiswick house and Gunnersbury park. They are the lungs that supply our air, and fight the pollution from the airport—one cannot have something that makes such good economic sense without suffering some disadvantages, but I hope that the new Labour Government will be looking at that.
Chiswick is, of course, famous for Hogarth, but I am extremely proud of all my constituents—they are all fairly famous. One of them has today reached the quarter finals at Wimbledon—Tim Henman. I know that the House would want me to send our congratulations to him—and, by the way, I am not doing anything in particular next Sunday!
The River Thames, the boat race, the Strand on the Green—these are all good features of the constituency which illustrate its diversity. Many companies have decided to locate their multinational headquarters in what was the golden mile of Brentford. I am fortunate also to have a brewery—my father is proud of me—known as Fuller's brewery. As a good constituency Member, I am obliged to sample the goods to make sure that they are all right for my constituents.
We also have Brentford football club, which should have gone up to the first division in May, but did not quite make it, sad to say. I think the club should be in the Premier League—I am sure that it will be one day.
The West Middlesex University hospital and its staff certainly are in the premier league. Its health workers, and those of the trust, show all the skills and commitment that entitle them to a place in the premier league.
Unfortunately, the hospital building is not so good. I look forward to an announcement soon that a start will be made on rebuilding the hospital. I first worked there in 1985; some of the patients have told me that they would sooner spend the night on a trolley than in one of the wards, which all the experts say are a disgrace.
We need to rebuild our health service. I am proud to represent the community nursing profession in the House and to be able to express my points of view about our

great health service, which has taken such a beating over the past 18 years. I congratulate the Chancellor on his announcements today. I am sure that all health workers, patients and families will also congratulate him on an excellent Budget which will open the door to a breath of freedom for all the people of this country.
Health care is not delivered by hospitals, doctors, nurses or paramedic teams: it is delivered by what the Budget provides for. The fact is that health is about poverty, housing, access to transport, and the safety of the working environment. It is also about incomes derived from work. There is no question but that poverty and ill health are linked. The Labour Government in 1979 commissioned the Black report which unfortunately was ignored by the Conservatives for the next 18 years. They refused to acknowledge the links between poverty and ill-health.
My football team did not nearly get to the first division by luck; it nearly got there by investment. Its manager, David Webb, invested in the youth side. Today, our Chancellor is investing in our youth. I welcome the opportunity to go to my constituency tomorrow and see the young people there.
As a district nurse during the past 18 years, I have sometimes felt ashamed when I have gone into people's homes in the winter. There have been times when it has been so cold that I have not even managed to get the car engine hot enough to feel warm in my car, yet I know that when people see me get out of the car they put on their gas heaters. Their houses are still cold when I go in, though, and I have been embarrassed and ashamed to learn that elderly people, who gave my generation everything that we have, have had to live in such conditions. Today marks the start—it is long overdue—of caring for that generation with dignity. These people have told me that they face a choice between eating and heating. "Old and cold" is not just a slogan. We must quickly begin to tackle the problem. We have the highest incidence of hypothermia in Europe, and that must end soon.
There is an air of freedom about everything that we have been doing since 1 May, and I am proud to be part of it. Caring makes economic sense. The first duty of a nurse is to be the patient's advocate. I have always striven to be that, regardless of people's age, race, religion, sexuality or disability. The first duty of a Member of Parliament is to be an advocate for one's constituents; similarly, I intend to be that, regardless of their race, age, religion, sexuality or disability. I look forward to learning much from, and contributing much to, the House of Commons.

Mr. William Ross: This has been an interesting day—not just the speech by the Chancellor on the first Labour Budget for 18 years, but four maiden speeches, too. I have enjoyed all of them. Each new Member has shown a commitment not just to constituents but to serving the House.
I came here first in February 1974. I looked around me at the time and wondered how long I would be here for. I am rather surprised to find myself still in possession of a seat in 1997. They seem to keep altering the boundaries in a serious effort to ensure that I always win. In any case, I hope that the maiden speakers will enjoy their time here


as much as I have. It is a wonderful place to be, not just a great honour but a great burden. Anyone who comes here as a Member of Parliament must speak up for constituents and seek their welfare. Each and every one of us came here because we believed in something, and we do not fulfil our role if we do not pursue the belief which brought us here in the first place.
Those who have been here for some time will know exactly what my views are. Whether or not they are popular, they are always enunciated in the House to any hon. Member who cares to listen.
I listened with interest to the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) talking about child care. I was rather surprised that she neglected to draw attention to the 16-hour rule relaxation, and even more surprised that she did not draw attention to the real problems experienced by nursery teachers, whose contracts of employment with schools mean that they are employed only in term time. Many other workers, mainly women, are similarly affected. Once the term is over, they find themselves denied social security benefits.
I understand that the social security commissioners have looked into the matter, and some cases are under consideration at the moment. Although the previous Government were not prepared to deal with the problem, I hope that this Administration will try to reach a resolution that takes into account the needs of these women, many of whom are qualified in child care. When summer comes round, they find themselves turfed out the door and they do not get a penny until school resumes. I hope that the woman Minister whom I see on the Front Bench, the hon. Member for Bristol, South (Dawn Primarolo), will take note of what I have said.
I also listened with considerable interest to the Chancellor's speech. It was interesting and wide ranging, and it was designed to endear him to some of his Back Benchers. I am sure that he will be aware that economics is the dismal science, and that if a Chancellor is popular with his own lot when he sits down, he is almost certain to have done something wrong.
I well recall sitting on this Bench—Ulster Unionist Members do not cross the Floor when Governments change, so we are a permanent fixture on the Opposition side—the last time that the House echoed with cheers after a Chancellor delivered a Budget. I hope that the present Chancellor recalls that. I believe that it was the 1986 or 1987 Budget—that Budget in which income tax was cut by 2p and cohabiting couples were allowed to buy their houses and obtain the full benefit of the tax relief until August. The result was not quite what the cheers suggested on the day.
I hope, therefore, that the present Chancellor keeps a fairly dismal eye on the economy as his policy develops, taking a properly sceptical view of the cheers and doing in time what he feels needs to be done. It would be in the interests of no hon. Member or constituent if the economy went wrong.
I have listened with interest to the debate on the windfall tax—a tax which seems to find so much favour in some quarters. We are told that the windfall tax is a one-off, but it seems to me to be spread over a few years. Therefore, like most taxes, it will have downstream consequences and an ever-growing tail of expenditure, which will cause considerable difficulties for the Chancellor and other Ministers in future years.
I believe that the only honest way to raise tax to tackle a difficult situation is by means of income tax. It is immediate, quick and effective. I am not sure that to grab a windfall tax just because it is handy is the best way to proceed and I fear that, in the long term, it will be proven not to have been a wise way to proceed.
However, I do welcome the policy that the Chancellor set out today on the public sector borrowing requirement. He pointed out a problem that for many years has worried those who take an interest in these matters—that the interest on the public debt is now the enormous sum of £25 billion a year. The idea that we are paying out that money year after year and getting nothing back has always horrified me.
The Chancellor seemed, almost for the first time I think, to hint that he intended so to control expenditure and raise revenues that he would be able to repay national debt, and that the interest charges would eventually disappear. Whether he is doing that just to keep within the Maastricht criteria is of no great importance to me. That debate is under way and is bound to lead to ferocious arguments in the House.
If the Chancellor can do what he is setting out to do—keep inflation low—there is merit in that in itself. We should keep all our financial affairs under firm control because, when those controls are removed, we always find it much easier to open Pandora's box than to get it closed again. In my time in the House, I have been through two major recessions. I do not believe that any hon. Member wants another—I certainly do not.
I confess that I have a very real problem whenever I hear a Chancellor say that he wants to borrow only to invest. I find it difficult to grasp the concept of borrowing or tax revenues being targeted at a particular element, given the global nature of our taxation system, tied in with borrowing and the way in which we spend revenues. The Chancellor will find it very difficult to convince anyone that if he raises £10 billion, £15 billion or £20 billion a year, that money will go into investment, which will pay for itself in a few years. He is going down a road that could lead to inflation, and I hope that he will carefully reconsider the words that he used.
When Budgets were moved from spring to autumn, some hon. Members drew attention to potential problems, and we are interested to note that the wheel has turned full circle. The present Chancellor has done what the Conservatives could not have brought themselves to do—he has admitted that it was a mistake, and we are now returning to a spring Budget. We were not told—I hope that we shall be told at the end of the debate—whether it is intended that there will also be a financial statement in the autumn, so that we may have a full-blown debate in the autumn, as used to be the case. That would give us not one, but two bites of the financial cherry a year, enabling us to hold the Government to account for the way in which they handle the revenues and expenditures of the nation during the year.
Interestingly, this time we shall have two Budgets within a year. In the 1970s, we had two, or even three, Budgets in a year. I hope that the change is not a precursor to returning to that mode of conducting our affairs. One Budget a year is quite sufficient. Although, understandably, this will be a short year, I hope that the Government will restrict themselves to one Budget a year for the remainder of this Parliament.
I welcome the expenditure on education, the national health service and housing, but I point out to the Minister that, in the present year's expenditure plans, planned housing expenditure for Northern Ireland—the part of the kingdom which I represent—has received a substantial reduction on last year's figure. Do the Government intend to reverse that trend? Great need exists, especially for the refurbishment and repair of dwellings, and for housing grants for those purposes.
Ulster Unionist Members welcome the help for small businesses on capital investment allowances and we welcome the reduction of VAT on fuel. However, I hope that the Government will examine the other burdens that are carried by retail businesses especially. In this case, I am referring to Northern Ireland, in that we have just had a complete rates revaluation, which is bearing very heavily on many businesses. There is a very short tapering-in period and it is limited to relatively low valuations.
The revaluation is bearing especially heavily on small businesses in town centres, for a variety of reasons. I hope that in future we shall have a longer tapering-in period and that rates revaluations will take place at intervals of five years, not 10 years, as previously. Ten years is far too long an interval.
I hope that valuation officers will remember that the increase in rental values that we are witnessing is very largely due not to the building or its situation, but to the capacity of the people who run the business. We all know of rundown businesses in small towns or villages that have improved when a sharp, capable business man has been brought in to run them. The quality of the shopping improves, but, five or 10 years later, they find themselves clobbered by the rates, whereas less able business men get away with a much smaller increase. That trend should be reversed.
In Northern Ireland, we have car parks controlled by the Department of the Environment. We are told that full-cost recovery is necessary. I have never been able to understand what elements the Department of the Environment was taking into account in calculating the full-cost recovery for the economic return, but there must be a scale laid down somewhere. A car park needs to be built only once and I cannot see why car park charges must increase.
The experience of retailers immediately adjacent to car parks is that even a relatively small increase in car parking charges can have an immense effect on those retailers' turnover because, within a week, people move to shopping centres outside towns. Very often, those customers do not return for a long time.
I hope that the Government will consider that problem, because we want to keep the commercial centres of many small towns, villages and, indeed, the larger towns in Northern Ireland as vibrant and thriving as they currently are. I have travelled through many towns in England, Wales and Scotland, and I know that, where there are out-of-town shopping malls, the town centre dies and the entire trade of the area passes into the hands of national multiples, which drain money away from the local area in large quantities. We want to preserve small local businesses and create an environment in which they can not only compete but grow and create real competition for the multiples.
My next point is more national in character. The Chancellor seems to be trying to increase the sum available for research and development, and for investment. I welcome the reduction in the tax burden in terms of investment, but there is another aspect of industrial regeneration—research and development in aerospace, defence and many other areas—where we invest insufficient money compared with our competitors in Europe, the far east and north America. We must act urgently to encourage our manufacturing base, especially those firms at the leading edges of technology, to invest more money in research and development.
Given the long lead times from when research and development take place until a product is sold, not only in this nation but across the world—it can take 10 or 15 years—people need tremendous encouragement if they are to invest so far ahead. The Government must keep a close eye on the matter so that the money apparently earmarked for research and development is not filched away and then given to shareholders under some pretext a year or two later. We must find a way to ensure that research and development becomes so acceptable to our major manufacturing industries that they go ahead and spend money on it. That is where the jobs will be created—not immediately, but for boys and girls who are now in their teens or at primary school. If they are to have high incomes and if this country is to have wealth-creating industries, we must look at that aspect of industrial regeneration.
There is supposed to be a two-way street with the United States in defence procurement. It might be a two-way street, but so far as I can see, five lanes seem to come from America while only half a lane goes there from the United Kingdom. The Government should exert a little more pressure to ensure that at least two lanes go back across the Atlantic so that we benefit from that.
The Chancellor spoke about the environment. In the current year, environmental services in Northern Ireland are booked for a 13.6 per cent. reduction. We shall not improve the environment by chopping off the money invested in it at that level; the Government should look at that matter again carefully.
I wish to register with the Government not only my deep concern about, but my absolute opposition to, what is happening to fuel prices. Those who live in or adjacent to large urban conurbations have alternatives to the private car, whereas those who live in Northern Ireland, Wales, Scotland or the west country have no alternative. In those areas, a car is not a luxury; it is an absolute essential. It is essential not only for the man of the house to reach his work but for the wife, mother and other people living in the dwelling so that they can get out, because they are often miles from anywhere.
I live a mile from my nearest village and we rarely walk there. Nowadays, few people walk that far to do their shopping, let alone carry it home; they use a car. A car is essential. People who live on the outskirts of London can hop on the underground or train and be in the west end in half an hour; shopping is much easier. The Government are far too willing to behave as though the whole country were urban and to close their eyes to the real dangers and problems of people in rural areas.

Mr. John Hayes: Does the hon. Gentleman agree that, before the car,


people in those types of communities were restricted to their communities? To increase the cost of car travel for people in rural areas would limit people to travelling only short distances to hamlets and villages, which would be sad. Today was a bad step in that direction.

Mr. Ross: Moreover, the shopping facilities enjoyed by the pre-car population no longer exist. They have disappeared as a result of the car, so this is a two-edged sword to some extent. People now want choice and they must go to large towns to get it.
I am also deeply concerned about the effect of steadily increasing taxes on tobacco. I do not smoke—thank God. Last year, Customs and Excise admitted—the Chancellor gave a similar figure today—a loss of some £560 million in tobacco tax due to smuggling and cross-border shopping. In the Budget debate earlier this year, Northern Ireland Members drew attention to the fact that hand-rolling tobacco can leave Gallaher's factory in Ballymena in Northern Ireland, go to the continent and, within two weeks, be sold on stalls in Northern Ireland for little or nothing. That happens to many other tobacco products, too. The Tobacco Alliance believes that the lost revenue is not less than £600 million but nearer £1.6 billion a year.
Raising taxes on tobacco can be counterproductive. I wonder whether we are trying to raise money from tobacco for the Exchequer or whether we are raising taxes, as some would allege, for health purposes. I should be happy if nobody smoked because it is a dangerous occupation. We know that it causes lung cancer and all sorts of problems, but it is legal and people do it. If we want to reduce smoking on health grounds, we should try other ways of doing it rather than constantly raising revenue from tobacco, which simply proves counterproductive.
We must also consider whether the concept of green taxes—taxing petrol, for example—is counterproductive. We now have a tax on the dumping of waste. Northern Ireland has a problem with certain types of waste. We have no facility to treat it because there is not enough of it, so it is not economical and must be shifted out of the country to be treated and recycled. Taxes raise the cost of doing that enormously and put an inordinate burden on certain industries in Northern Ireland. I therefore hope that the Government will look carefully at that matter.
Northern Ireland has another problem because it has a land frontier. The Chancellor said that he was looking at the environmental implications of quarrying, the extraction industries and the pollution of water supplies. If we start to pile more burdens on that large industry in Northern Ireland, it will close down and move across the frontier where there is no environmental tax. A whole industry and the manufacturing capacity in building products will be wrecked as a result.
Before the Chancellor goes too far down that road, will he look at the implications for the Province of an environmental tax? People in England will not face that problem—they will have to carry the burden—but folk in Northern Ireland will avoid it and, given the common market, nothing can be done about it.
The Chancellor also touched on the conversion of building societies. I understand that that means an injection into the economy this year of some £35 billion. I have often wondered what the effect of the repayment of public debt was the last time that we got round to it,

when quite large sums were repaid. Some was repaid to people overseas and some into our own economy. When I ask economists in the House what effect that has, they simply look blank and say, "I don't know, Willie." May I ask the Minister whether the Treasury knows what the effect was. Has the effect of that input of money into the economy finally been determined? Did it lead to inflation? Was it part of the problems that we encountered in the late 1980s and early 1990s, or did it have no effect whatever? Was that money invested elsewhere?
What will be the effect of the injection into the economy of the present windfall from building societies? It is not going into the pockets of a few people or into a few companies. It is going into the pockets of millions of people, many of whom will go out and spend it, so we can expect a rise in retail sales. Given the present state of the economy, those will be sales of imported goods, so we could be adding to our problems, unless the Government find some way of making it attractive for people to keep that money in savings.
Today, we saw the first instalment of the Chancellor's programme—a programme which I think will be comprehensive and far reaching. No doubt some aspects of it will have merit and, as with all Chancellors, other aspects will go horribly wrong. Some measures may be based not on the sound principles of financial prudence that he expressed today, but on other, more political considerations, and something will go wrong. As there is so much to come, we shall have to wait until his spring Budget to find out the Chancellor's final conclusion after his assessment of the financial state of the country, and where he wants to go.
Having handed to the Bank of England control over such a large part of our financial affairs, will the Chancellor be able to do what he desires to do? I think that the Bank of England does as the Bundesbank does, and that getting ourselves into that position is neither wise nor far-sighted. It will bring us grief. We should have learnt from the past that, whenever the crunch came, the central German bank did what the German Government said.
There must be a political input into national finance. Ultimately, the Government must face the electorate, as the previous Government did and lost. Some day, the present Government will have to do so. It is up to politicians—to the Government—to take political decisions as to what is best for the nation's economy and its people.
By handing control to the Bank of England, we have handed it to what might be described as a peculiar quango, which is not responsible to the electorate. I deplore that and I believe that we will live to regret it.
I wonder whether, at the end of the day, the Chancellor's figures will add up.
I said at the beginning of my remarks that Chancellors should expect to be unpopular. I hope that when this Chancellor becomes unpopular, he is unpopular for the right reasons, but I am always a sceptic on these matters.

Mr. Martin O'Neill: I begin by putting on record my appreciation of the speech of the Chancellor of the Exchequer, my right hon. Friend the Member for Dunfermline, East (Mr. Brown).
I remember that, when I entered the House, one of the defining moments was the speech by the then Chancellor, now Lord Howe, in his first Budget in 1979. Some of us were filled with optimism and enthusiasm. We had won seats from political opponents, and the realisation that the Labour Government had been defeated had not yet sunk in. In the space of a few short paragraphs, Lord Howe cut income tax, raised VAT and put interest rates through the roof.
I remember the sharp intake of breath in the Chamber that afternoon. We realised that power had shifted. Those of us who had not been on the other side of the House—we knew the significance, but we had not physically shifted over to the Opposition Benches—got an idea that things were on the move.
I should like to think that the Chancellor's speech today will have had a similar impact on Conservative Members. It has given great encouragement to us, which was evidenced by at least two of the maiden speeches tonight—the speeches of my hon. Friends the Members for Eastwood (Mr. Murphy) and for Brentford and Isleworth (Mrs. Keen).
My hon. Friend the Member for Eastwood, a new Scots Member, took us round his constituency and made a good, comprehensive contribution, although he omitted the other famous national drink that emanates from his constituency. He concentrated on a process a little further down the line—the toilet facilities provided by Shanks. My hon. Friend the Member for Brentford and Isleworth made a first-class speech. I hope that she will not mind my saying that she is an old hand. Many of us had been hoping since 1987 that she would get into the House. We are delighted that she is here, and we know the contributions that she has made elsewhere. I know that, from both those colleagues, there will be telling contributions in the future.
From the other side of the House, we heard contributions from the hon. Members for Witney (Mr. Woodward) and for Weston-super-Mare (Mr. Cotter). I wish them well in their endeavours. The hon. Member for Witney may find that in subsequent debates there is a 10-minutes rule and he will be constrained in the length of his speech.
I shall not detain the House unduly with such pleasantries, important as they are. I return to the boldness of the Chancellor's speech. Despite what has been said about what was or was not promised in the election campaign, no one can doubt that the windfall profits tax was to be one of the core elements in Labour's strategy. It is clear that there is no public support, political will or financial resources to return to public ownership any of the privatised utilities or companies. That is not an issue.
We have seen the movement from public ownership to privatisation to regulation and, in the case of the energy utilities, we shall see before long the process of liberalisation. In the early stages of the post-privatisation period, there was a degree of laxity on the part of the regulatory bodies in handling the prices charged by the companies and other aspects of their activity.
It is not a worthwhile exercise to try to ascribe motives to individuals. Suffice it to say that the utilities were sold too cheaply and regulated too lightly and, although the

capital gains that arose from their flotation were taxed, they were never properly dealt with. In the case of the energy utilities, the profits came as much from world market conditions and fairly obvious cost cutting as from management expertise, and led to the share options scandals and the fat cat syndrome. That, in turn, led to the windfall profits tax and attempts to disparage the tax on the grounds that it was the politics of envy.
In the previous Parliament, I was fortunate enough to chair the Select Committee on Trade and Industry. My colleagues and I investigated the regulation of energy utilities. Thanks to the herculean efforts of the Clerk and her staff and our superb advisers, we were able to squeeze out a report in the dying days of the Parliament, just before the election. We did not have an opportunity to debate the report, but, had we had that chance, it would have informed the discussion about the character of windfall profits taxes.
The report did not take upon itself the task of advocating a windfall profits tax. It was a unanimous report. The Committee consisted of six Conservative and five Labour members. The report showed clearly the extent of the excess capital gains and returns on investment enjoyed by shareholders, against the comparatively small cuts in electricity and gas bills over the same period. The figures given by the Department of Trade and Industry to the Select Committee showed that, between the fourth quarter of 1986 and the first quarter of 1996, average domestic prices for electricity fell by 1 per cent., and by 8.5 per cent. on a value added tax exclusive basis. Over the same period, gas prices fell by 25 per cent. At the same time, however, shareholders, before tax and year on year, were enjoying an 11 per cent. increase in their income. I am speaking of British Gas shareholdings.
Regional electricity shareholders were seeing a before-tax return of between 32 and 46 per cent. per annum over five to six years. The figures were slightly different for the Scottish and Irish companies because they were privatised at a higher price than the other electricity companies and were subject to a different basis of price regulation. In simple terms, it was the cost of living minus the X factor rather than the cost of living plus that factor that was the core of the utilities' problem in England and Wales.
It is correct that due account should be given to differing circumstances. There are complications when considering the position of Scottish Power, for example, because it is now a multi-utility. The three elements that make up the company have all been subject to different forms of regulation. I am sure, however, that my hon. Friend the Paymaster General is more than up to the task that faces him. The figures for dividend yield and capital gain have been of the order of those to which I have already referred. If anyone wants to look them up, I suggest that he or she reads pages 63 to 67 of the report of the Select Committee on Trade and Industry.
There are those who argue that all that I have said is irrelevant because many of the companies are under new owners. I have taken the trouble to talk to some of the predominantly north American owners of the companies. It might well be put to them that the companies were purchased in the knowledge that there was more than a chance of a change of Government, and that the Labour party had flagged up repeatedly that there was to be a windfall profits tax. How would the directors go to their annual general meetings, having to say, "I am sorry but


our profits from our UK operation are not as high as we would have hoped because, out of the blue, there has come a windfall profits tax"?
I spoke to senior managers and directors of those American utilities. They gave me an old-fashioned look and said, "We have made provision for this." They made provision in the financial structuring of the company or they discounted the price when they purchased the company in the first place.
I am aware that, in this morning's press, consideration has been given to the tactics adopted by Southern Electricity, which has been one of the most prominent opponents of the windfall profits tax. Before the election, it was talking at one stage about raising legal actions on such a tax. We have heard no more about taking the matter to the courts. I presume that Southern Electricity has been given additional legal advice to the effect that it would not be worth spending too much money on such actions. At the same time, however, the cupboards were stripped bare. There was a process of asset stripping.
Concern arose over the regulation of electricity companies when Northern Electric was to be taken over by Trafalgar House, a British firm. It appeared that £500 million was found out of nowhere to provide a fighting fund to withstand the predatory approaches of Trafalgar House. Another company was able to clean out £470 million from the accounts and shift it elsewhere.
Those companies will complain, or moan. They would not be doing their job if they did not take that approach. When it comes to increasing prices, however, a company that is regulated and operating under a licence granted by a regulator and approved by the Monopolies and Merger Commission—I am talking of increasing prices for reasons that go beyond the licence—has first to approach the regulator to convince him or her of the need for a change. The regulator then has to pass the matter to the MMC for its consideration and approval.
Before the application, as it were, can go to the MMC, it must go to the Secretary of State of the appropriate Department. At that stage in the process, I cannot envisage a Labour Secretary of State not vetoing any further movement on the renewal or review of the licence in between terms. Even at the end of the period covered by the licence, I cannot see that regulated companies would be able to make their consumers pay. The new licence that would be sought in the new round would not, I think, be acceptable to the regulator or to the MMC.
Those who talk about the consumer paying are not sufficiently aware or they are being wilfully dishonest. My right hon. Friend the Chancellor of the Exchequer referred in passing to the regulators, but it was clearly stated in evidence that my Select Committee took from regulators that the companies had the ability to make consumers pay again. It must not be forgotten that the purpose of the windfall profits tax is to take account of the fact that the people paid too much in the first place. The companies are sufficiently cash rich to deal with a windfall profits tax and I do not think that there will be a problem.
The exciting feature of the tax is that it will give us the opportunity of introducing the welfare-to-work programme, which is central to the Government's ambitions. When sitting on the Opposition Benches, my right hon. and hon. Friends became impatient in the knowledge that large sections of our communities were

languishing on the dole for long periods in the absence of pump-priming facilities to get people back into employment. It was the greatest frustration that we experienced in our period of opposition. That is why we place such great importance on the Budget. It is a defining moment in our political lives. My right hon. Friend the Chancellor of the Exchequer has identified the means and the objectives to achieve a reduction in unemployment and so to eliminate people from that disease.
I think that it was the hon. Member for Witney who talked about 1.5 per cent. unemployment in his constituency. There are villages in my constituency where unemployment is in excess of 40 per cent., where virtually no young people have ever worked for an employer in their lives. I am speaking of men of 22 and 23. I say to them, "Are you interested in better dole money, better social security or a job?" They say. We are sick and tired with social security. We want a job."
The tragedy of many of our people has been that as George Bernard Shaw once said, if we do not get what we like, we come to like what we get. There are far too many people whose ambitions are too low, along with their expectations. They are resigned to lives that are not anything like those that they should be enjoying in a civilised society.
Against that background, my colleagues and I see today's Budget statement as a watershed in British politics. We see not a return to the 1970s, the halcyon days of a previous Labour Government, but a means of breaking through and moving forward to a new frontier within which we shall have a strong economy and high levels of employment that will be sustained for decades ahead. That is the test that my right hon. Friend the Chancellor of the Exchequer has set himself. It is the test which the Government must pass. Given the start that has been made today, I am confident that we shall go a long way to achieving our objectives in making the United Kingdom a better, more civilised and happier country than it has been for a long time.

Mr. David Prior: Thank you very much, Mr. Deputy Speaker, for calling me to make my maiden speech this evening. There is an old adage that the opposite of talking is not listening, but waiting. I hope that the hon. Member for Ochil (Mr. O'Neill) will excuse me, on this occasion, for not having listened to his speech as carefully as I might otherwise have done. This Chamber has a great reputation for honesty, but I hope that no one will object when I go home to my constituents and say that I addressed a packed and noisy Chamber this evening.
I have the great privilege to represent North Norfolk. I am grateful for the fact that the ex-chairman of the North Norfolk Conservative Association, my hon. Friend the Member for Cotswold (Mr. CliftonBrown), is here tonight at my side. For the past 27 years, my constituency has been represented by Sir Ralph Howell, who was well known for the care that he lavished on his constituents. Ministers knew that he was the sort of man who, when he wrote letters to them, would never give up. He was the scourge of Ministers, local government officials and bureaucrats at all levels.
Sir Ralph had two great passions. First, he was a passionate believer in the European Union. When he was a young man, the first time that he saw continental Europe


was when he looked down on Germany through the bomb sight of a Wellington bomber. That experience made him believe that a strong European Union was vital for peace in Europe.
Sir Ralph's second abiding passion was his belief and faith in workfare. He would have been pleased to have heard some of the welfare-to-work proposals in the Budget statement. I was very much struck when the hon. Member for Ochil spoke about long-term unemployment. It was the waste and misery surrounding that which drove Sir Ralph towards workfare. I share his views about the awful waste of long-term unemployment, having seen it in much of England, Scotland and Wales when I worked for British Steel. I do not believe that welfare to work, based on Government subsidy, is the right way to cure the problem, but I share the deep concern of the hon. Member for Ochil about the tragedy of unemployment for so many people. Sir Ralph was a man of great conviction and principle and I am proud to follow in his footsteps.
When making one's maiden speech, it is tradition to refer to one's constituency. I am afraid that I shall disappoint the House and continue with that tradition, so I ask hon. Members to bear with me for a while. Agriculture remains one of the most important industries in North Norfolk. The Cokes and the Townshends, whose families were the foundation of the agricultural revolution in the 18th century, still hold land and farm in North Norfolk. A strong, profitable and competitive agriculture industry is vital to the interests of North Norfolk.
My county is still very rural. I agree with my hon. Friend the Member for Witney (Mr. Woodward) about field sports. They are a vital freedom, a tradition and a way of life in North Norfolk and our countryside would be much the poorer without them.
North Norfolk still has a local shellfish industry. The Cromer crab has a reputation that extends way beyond Norfolk. Our history of shellfish fishing shows that the best regulators are the generations of fishing families who have caught shellfish off the coast, not distant bureaucrats in Whitehall or Brussels.
Probably the most difficult issue in North Norfolk—and, indeed, in most rural areas—is the balance between keeping Norfolk special and the requirements of development. Because of the development of out-of-town supermarkets, the hearts of towns such as Fakenham and Cromer have disappeared. There has been a demise in village shops and local amenities. There is constant conflict between the need for a strong tourist industry and the pressure on the Norfolk broads and the coast. I believe strongly in the need to provide decent, affordable housing and public transport for local people, but I realise the real pressures of housing on the countryside.
Small businesses are the mainstay of employment in North Norfolk. I was disappointed to hear no reference in the Budget statement to improving the uniform business rate as it applies to small businesses. There is no doubt that it is skewed too much against small, usually retail, businesses. Some of it should be switched back to larger businesses.
North Norfolk has an elderly population. Many people have worked hard all their lives and, although they do not have great savings, they have enough to prevent them from getting any help from the state. Those people are

especially vulnerable and they will not welcome the news today that their pensions will be adversely affected by the abolition of the tax credit on dividends paid to pension funds. Neither will many of them be pleased to hear that they will no longer get tax relief on the premiums paid for private health insurance.
We have a very special hospital at Kelling. It is a community hospital, not a big hospital, and many of its patients are old people. I serve notice on the Secretary of State for Health that Kelling is special and that everyone in North Norfolk will fight to keep it alive.
I have spent the past 20 years working in manufacturing, mainly for British Steel. I have seen a fantastic impact on competitiveness and efficiency over the past 20 years. It has come about through deregulation, tax reduction, vastly improved industrial relations, privatisation and much less government.
My father, Jim Prior, made his maiden speech in this House in 1959, when the Japanese were about to open their first transistor radio factory in Ireland. He said then that, as a farmer, he would never again buy any Irish bullocks if the Japanese were allowed to open a factory in Ireland. Things have changed a great deal since 1959. We now live in a global economy with unrestricted capital movements and widely dispersed technology and skills. The general agreement on tariffs and trade has reduced many of our trade barriers.
My right hon. Friend the Leader of the Opposition earlier quoted from a report by the World Economic Forum. He must have had pre-knowledge of my speech. The report said:
what we see in the United Kingdom is an economy reborn and the sweeping privatisation, deregulation and other structural reforms have made us well poised to compete in a global economy.
That success has been recognised by companies around the world. There has been more foreign direct investment in Britain since 1979 than Germany received in Marshall aid after the war, in real terms. It is against that background that we must look at today's Budget.
The Budget contains three illusions. The first is that the windfall tax and the abolition of the advance corporation tax credit have no victims. Both have victims. The windfall tax will erode the investment potential of those on whom it is levied. The abolition of the ACT credit will hit pensioners.
The second illusion is that Government can create jobs. In fact, only competitive and strong companies and businesses can create jobs. Jobs built on short-term subsidies will have no security.
The third and last illusion is that the Government believe in the long term. They cannot and will not stop meddling in the short term. Surely one of the lessons of the past 20 years is that it is best for Governments to keep out of business as much as possible.
The Budget, combined with the Government's views on the minimum wage and the social chapter, marks a watershed. I pray that it will not bring to an end all the improvements that we have achieved in the past 20 years.

Mr. Barry Jones: I congratulate the hon. Member for North Norfolk (Mr. Prior) on his maiden speech, which was made in the relaxed, generous and genial style of his father, Lord Prior, whom


I remember as a notable Minister of Agriculture, Fisheries and Food and Secretary of State for Northern Ireland. Lord Prior was a much liked House of Commons man, so if the hon. Gentleman does half as well as his father he will do very well indeed.
I also congratulate my hon. Friend the Member for Brentford and Isleworth (Mrs. Keen) on her maiden speech, which went very well. She was once my constituent and her mother still is. Her late father, who was my friend, would have been proud of her. She will be a fine Member of Parliament for her constituency.
With the Budget in mind, I should point out that between 1979 and 1981 about 2.5 million manufacturing jobs disappeared from the British economy. During that time we had a terrible trio of principals: Mrs. Thatcher was the Prime Minister, Geoffrey Howe was the Chancellor and the Secretary of State for Trade and Industry was Sir Keith Joseph. In so short a time, that trio destroyed more jobs than Adolf Hitler could have dreamt of destroying, and it led to huge and enduring unemployment queues. Thereafter, we became a divided society.
In less than one hour, the new Labour Chancellor delivered an historic reforming Budget. He was convinced of the need to relate his statistical detail to the flesh and blood of ordinary and underprivileged people. I thought that it was an innovative and compassionate Budget. The Chancellor has kept our party's promises, honoured our manifesto and not abused the mandate that the Labour party received from the electorate at the general election on 1 May. I also noted the cool authority with which he delivered that reformist Budget.
The Chancellor wants to equip the nation for the future and to rebuild the welfare state. It is the first Budget in 18 long years that seeks both economic efficiency and social justice. It will end abuses and loopholes. It is good that the Chancellor is taking a strategic view of our manufacturing capacity. He proposes to end the spending of huge sums of money on the few, and offers skill-less and workless under 24-year-olds a new deal. He has a highly planned scheme to tackle long-term unemployment, and lone parents and the disabled are not forgotten. My constituents will benefit from those measures.
From what I have seen and heard today, I can sum the Budget up as moral, practical and honourable. I judge that it will improve the fabric of our communities. I hope that it begins soon to help to heal the divisions and wounds that are so self-evident in British society. The Chancellor is to be commended on a Budget that will prepare our nation for tough, international competition in the next century.
There are more than 1 million fewer jobs in Britain than there were in 1990, one in five families have no one working, and 1 million single mothers are trapped on benefits. The gap between rich and poor is wider now than it has been for generations. Those facts—those human details that to me are grim realities—set this remarkable Budget in a serious context.
The Budget seeks social justice and maps out a strategic high road for our national recovery. I judge it to be a Budget which takes a sophisticated look at the means of achieving the much needed recovery of our former national industrial greatness. That is what I hope will be the consequence of today's Budget.
I am glad that the Government will get a quarter of a million under 25-year-olds off benefit and into work by using money from a windfall levy on the privatised utilities. It is clear to me that this Chancellor and this Government are determined not to continue down the road of a permanent have-not class of unemployed and disaffected people. My constituency can only benefit from the proposals that have been outlined today.
I admire the Chancellor's long-term objective of high and stable levels of employment: it has shades of Mr. Attlee's programme in 1945–50. The best way to tackle poverty is to help people into jobs. Unemployed citizens have a responsibility to take up training places or work, but they must be real job opportunities. In past years, we have had some disgraceful schemes that have led to cynicism among the young and their parents.
The Chancellor's welfare-to-work programme will attack unemployment and break the spiral of escalating spending on social security. The scheme cannot work without partnership between government and business. Partnership will best tackle the shame of long-term unemployment.
I like the positive approach to proper qualifications by 2000 for every 17 and 18-year-old. Many people in that age group have missed out. It is a forgotten army, a mighty army, a youthful army, and an army without any purpose as of now. Perhaps our colleges of further education could be centres for the operation of this programme: they could share in the challenge. Deeside college of further education is a good college and it seeks to play a role in making welfare to work a success.
I shall briefly describe the problem that we are tackling. My constituency contains large social housing estates which are the seat of intractable problems of unemployment and decay. I do not believe that my constituency is unique, because every city has a near permanent have-not class of unemployed. It cannot be right for young people under 24 years of age to remain unemployed. At last, the Government are initiating measures to tackle the problem.
If we hate and fear the growth of violence and other criminal activity in our constituencies, we should welcome the welfare-to-work Budget. Given the drug abuse, graffiti, constant harassment of families, vandalism, car crime, squalor, ugliness, disrepair and dereliction, the welfare-to-work Budget is a big step in the right direction. It just has to be. So far, nothing has been done and if we leave the problems alone, British society will face even graver problems in the near future. In the same way, the plan to release in Wales the sales receipts of municipal housing has to be good in so far as it will improve housing and generate wealth.
If a British Government do not tackle the problems, if we fail, if the have-nots remain rooted in their evident despair and continued separateness, the future for British society will be bleak. A divided, ill-educated Britain will not be able to renew her industries and cope with the growing cut-throat international competition. Without social justice and a successful welfare-to-work programme, without a clear national strategic industrial policy, our society will be ripped apart by division, resentment and envy. That might be our fate.
The windfall tax has been criticised today by the Leader of the Opposition. My right hon. Friend the Chancellor's plans for the windfall tax have been criticised for their


ruthlessness. I welcome the tax and its ruthlessness because it will give hope and dignity to tens of thousands of alienated young people in Britain today.

Mr. Geoffrey Clifton-Brown: It is a great privilege to have been here this evening to hear five such excellent maiden speeches. It was a particular privilege to hear the speech made by my neighbour, my hon. Friend the Member for Witney (Mr. Woodward), from whom I am sure we shall hear many excellent speeches in the future. I was also particularly pleased to be here for the maiden speech of my hon. Friend the Member for North Norfolk (Mr. Prior). He represents a constituency I know well, having been constituency chairman of his excellent association for five years. I completely agree with his comments on his forebear, Ralph Howell, who I am sure would have been pleased to hear my hon. Friend's maiden speech this evening.
This is a Budget like the house of mirrors—what we see on first impression is the obverse of the reality. It is also premature and unnecessary. I was surprised not to hear anything today about the biggest technical revolution in the way we present public finances, which is about to occur in the next two years: the change from cash accounting to an accruals basis of accounting. That will be an extremely important change and it will, among other things, involve individual Departments' producing their individual accounts, including valuations of their assets, so we will begin to see the total assets that are used by the Government and whether they are used effectively.
The Chancellor was able to present such a glowing picture this afternoon because of the superb economic situation that he inherited. The combined picture of growth, inflation and interest rates and unemployment is probably the most favourable that Britain has seen since the second world war. It is a tribute to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) that he has presided over such a successful economic phase in this country. His particular success has been his judgment in setting the base rate. He has been able consistently to set a rate which keeps inflation at the target level. For that, a great tribute must be paid to him.
If we have a Chancellor who can exercise that judgment, it is much better left in the hands of the Chancellor and the Treasury than in the hands of an independent panel comprising the Governor of the Bank of England and other experts. On the other hand, if we have a Chancellor who is not sure of his judgment, the decision will be handed over to the Bank and an independent panel of experts.
Another reason for today's glowing economic situation is the fact that the incoming Government have been able to rely on probably one of the tightest two-yearly rounds of public expenditure since the second world war. Tribute must be paid to the previous Member for Bristol, West, Mr. Waldegrave, and his intellectual rigour in controlling each Department's expenditure. This is a fiscal tightening Budget, which is probably correct in the current situation. It overcomes the problems that have begun to emerge of broad money expanding too fast, interest rates having to be put up, too strong a pound and the danger to our balance of payments thereby. This is probably the right sort of level of fiscal tightening and it will be marginally reduced next year.
However, I am much less happy with the reduction in reserves of some £2.2 billion. Whereas the previous Conservative Government managed to put an extra £1.6 billion into the schools budget without raiding reserves, the present Chancellor has been able to put in only £1.3 billion while running down the reserves, which is not particularly satisfactory.
The Chancellor referred to reducing the trend rate of growth to nearer 2.4 per cent. because, as I say, the economy shows some signs of overheating. The critical factor in that reduction will be the rate of inflation. It was a retrograde step to allow the Bank of England to set the rate of inflation to plus or minus 1 per cent. above or below the Government target rate of 2.5 per cent., which shows that the Chancellor is prepared to see the inflation rate slip up to 3.5 per cent.
The Red Book predicts growth of 3.25 per cent. in 1997 and 2.5 per cent. in 1998, with inflation at 2.5 per cent. and 2.75 per cent. in those two years. That is an excellent picture because on only two occasions since the war has growth outstripped inflation, one of which was last year. If the Chancellor manages to achieve that target this year, that will be very satisfactory. That tends to be the trend in the major industrialised nations, as shown in table 3A.1 in the Red Book.
I was also particularly pleased to see in the Red Book that the rate of debt is coming down. It is predicted to come down as a percentage of gross domestic product from 53.75 to 53 per cent. next year and 51.5 per cent. the year after. That is particularly welcome because, as the hon. Member for East Londonderry (Mr. Ross) said, we pay £25 billion a year to service that debt. That is a huge on-cost which we would do well to try to reduce in the longer term.
I am not particularly in favour of the windfall tax because it is a one-off tax and once the utilities have been taxed they cannot be taxed again. On the other hand, I am pleased with the welfare-to-work programme that the Chancellor endorsed today. As my hon. Friend the Member for North Norfolk said, it is, in essence, a form of workfare, which I have long championed. If the public purse is paying people, particularly youngsters, a benefit because they are unable to work, society should be able to request them to participate in some social scheme, education or community work. It is high time that we came round to that way of thinking.
The real betrayal of all betrayals in the Red Book is in table 4.9, which shows us that the Chancellor predicts that, over the lifetime of this Parliament, unemployment will remain at 2 million. That is a shocking admission, because throughout the five years of the previous Parliament we were constantly criticised by the Labour party for tolerating that level of unemployment. The prediction is a disgrace and if the Labour party cannot get unemployment down, they ought to resign and let us have another general election.
The trend rate of growth depends critically on three factors—on trends in the labour force and on levels of unemployment and productivity. I have already referred to the rate of unemployment and I am pleased to see that productivity and investment are likely to grow. In that respect, I pay tribute to the Chancellor for having reduced the rates of corporation tax for both larger and smaller firms.
That was a great surprise to me, because it was one of the great successes of the previous Administration that we managed to reduce the rate of corporation tax so much. That is especially important in today's fast-changing world. Large multinational corporations can shift great chunks of capital and even their corporate headquarters or their research and development around the world at short notice.
By keeping corporation tax at what is—as the Chancellor said—the lowest level in the G7, we shall retain such world-beating companies as Glaxo, which has both its research and development and its corporate headquarters in this country. The substantial amount of corporation tax that that company pays will therefore keep coming into the United Kingdom Treasury, and I pay tribute to the Chancellor for that shrewd move.
I also welcome the measures affecting capital allowances for small businesses. It is helpful to have a short-term boost for capital allowances and that will help to increase our investment.
However, I criticise the Chancellor for his failure to contemplate any changes in the uniform business rate. Many small businesses, especially in rural areas such as my constituency, are suffering because the rate is too high.
I visited many post offices, village shops and other, similar, small businesses during the election campaign. Their proprietors were pleased to see our proposals for reducing the uniform business rate valuation by £1,000. I urge the Labour Government to consider that idea for a future Budget. It would be most welcome and it would not be hugely expensive.
I welcome the environmental measures in the Budget, although I do not think that they are imaginative enough or go anything like far enough. One subject on which the Chancellor has listened to the environmentalists is improving the insulation of houses for the lower paid through the home energy efficiency scheme. I know that the previous Government were constantly asked to do that and I am glad that it has now happened.
I must tell the Labour party, however, that if we are to meet our international environmental targets, especially the reductions in CO2 levels, we shall have to go much further with the type of environmental and fiscal measures that have been so successful in the past. One example is the conversion to unleaded petrol. Ten years ago, unleaded petrol accounted for about 10 per cent. of the market; now, it represents about 90 per cent. Through fiscal incentives, we can do a huge amount of good for the environment.
None the less, I echo the comments made by various hon. Members to the effect that we cannot go on taxing the car out of existence, especially for poorer people in rural areas, for whom the car is a lifeline. They often live in isolated areas, or in villages without a shop or a reasonably regular bus service. If they are to have any standard of living at all, they must rely on the motor car.
I caution the Government about going too far towards taxing the car out of existence, but of course we shall have to find ways to reduce the rate of growth in the number of cars in the nation.
I was unhappy to realise that there was little really new thinking in the Budget. Given that a new Government have won an election with a big mandate, I thought that we might see some really imaginative thinking, such as the reform of capital gains tax.
Speaking on the previous Conservative Budget, I advocated different rates for short and long-term capital gains. It seems to me that if people hold a gain on an asset for more than five years, they should pay a rate of capital gains tax lower than their marginal tax rate. That is only reasonable. As things are, many people are locked in to long-term gains, which does not benefit their business or their savings. Some good research has been carried out in America on this subject, showing that the business increase by a fiscal reform of this kind over five years is almost neutral. I urge the Government seriously to consider that.
I add a note of caution to the middle classes who, by and large, have not been hit today. I do not think that they have seen anything yet. They will find in future Budgets that there will be increases in national insurance and in the marginal rates of income tax and that there will be reform of inheritance tax to make it more like the old capital transfer tax by abolishing the seven-year rules—the so-called potentially exempt transfers. It did not happen today, but the Government will introduce these measures next year or the year after.
This Budget was unnecessary and it will not help jobs, growth or savings. It points the way to increases in interest rates—which will have a disastrous effect on an already too high pound and our balance of payments—and to higher inflation and personal taxes. Economic growth will decline over the next five years and the Budget will reverse all the economic gains that we have made so painstakingly in the past five. Each time after a socialist Government have been in office, a Conservative Government have come in and taken over an economic mess. I hope that we will not be doing the same thing in five years' time.

Mr. Ken Livingstone: I hope that the five hon. Members who made their maiden speeches will not be offended if I do not spend time praising them, but know that other hon. Members wish to make maiden speeches this evening. I hope also that my right hon. Friend the Chancellor will not be too offended if I do not lavish much praise on him. He has had far too much praise from my hon. Friends today than is good for any human being to take in one day. Clearly, after 18 years of horrendous Budgets, it would have been a relief even if he had come here and said nothing. Many of the measures are particularly welcome, and the relief for education and the NHS will be welcomed throughout the country.
I want to focus on two or three points that cause me concern. First, I would have been happier if the relief were coming more rapidly. The crisis in the NHS this autumn and the fact that many schools need more money mean that the relief should have been provided immediately. I was particularly disappointed by the small amount of money available for council housing and modernisation. Even if we build very cheap houses, the entire sum of £900,000 means that we will be hard put to build 15,000 new homes. I know of a dozen London boroughs with waiting lists longer than that, and this matter must be looked at again. We must bear in mind the fact that even in the worst days of the last Labour Government—when the IMF was at our necks—we were building more than 100,000 council houses a year.
I am worried about my right hon. Friend the Chancellor's underlying assumptions about the global economy. In every one of the assumptions on which my


right hon. Friend has based his Budget, he has taken the most optimistic projection. That is unwise—certainly for someone who has gone out of his way to create such a dour iron Chancellor image. Life just does not work out that way—all assumptions do not come up on the sunny side. In particular, the assumptions about the global economy are optimistic. We are told in the Red Book that we expect the American economy to slow down but still grow, and that growth will pick up in Japan and in Europe.
The American economy is coming close to the end of seven years of growth—a long business cycle. The issue is how rapidly the American economy turns down and how severe that will be. It could turn out that very little good news comes out of the American economy. As long as the European Governments continue to force their economies into the Maastricht corset, I see little prospect of sustained growth in Europe to assist us. The underlying assumptions about the global economy must mean that some problems will emerge for the Chancellor as the projections become reality in the next year or two.
We are having a consumer boom in this country. It may not be on the scale of Nigel Lawson's boom in the 1980s, but it is beginning to look horrendously like it—particularly its concentration in the south-east and on those who have so much already.
The £35 billion of windfalls that will drop into people's pockets following the ending of building societies' mutual status and the insurance companies' sailing off into the new bright wonders of the entrepreneurial market—the Chancellor mentioned that—will have a horrifying impact. Again, that £35 billion will be largely concentrated on fairly well-off people in the southern half of Britain. If such people are able to shift money from one building society account to another, they are unlikely to have large debts to pay off. That money could fuel a massive consumer boom, sucking in imports, overheating the economy and causing inflation to rise. I deeply regret the Chancellor's failure to take firm measures to claw a substantial proportion into the state.
There is no justification for anyone today to receive the money. It is wealth that has been built up over generations, which people are cashing in because of the climate of greed that has become the norm. The Chancellor has missed a great opportunity to pull some of it into the Government's finances in order to reduce the scale of Government borrowing.
There is a real risk of a consumer boom that will cause severe damage, and we know exactly what will happen in such circumstances. If the economy has to overheat, one of two things will happen. Eddie George will bang up interest rates, which will massively depress the real economy and industry, and cause those who have not benefited from the boom either to lose their jobs or to suffer a decline in living standards; or the Chancellor himself will have to introduce, in a year or 18 months, measures to take the heat out of the economy—thus running the risk of precipitating a severe turndown in the economy that could lead to recession. We saw that happen in 1990. I believe that the lack of action to deal with overheating of consumer demand will return to haunt us, especially as it is so strongly led by the housing market.
Someone with half a million pounds to spend on a house will not worry about spending 1 per cent. more on stamp duty, and someone with a quarter of a million pounds to spend will not worry about another half a per cent. The measures taken by the Chancellor to take the heat out of the housing boom are entirely inadequate. I hope that those who collect their windfalls will save and invest them—that would be wonderful—but, if they cash them in and spend, we risk facing the problem experienced by the British economy at the end of the 1980s. After a recession such as that, more industries have gone, more of the real economy has been destroyed, and many people's lives are ruined.
Then there is the question of debt. For all the talk of the iron Chancellor, he strikes me as a great big cuddly toy. There is nothing threatening about what he is doing about debt. Here we are, borrowing after five years of growth. We are in the sixth year of growth, and the Government are continuing to borrow. I agree with the Chancellor about the golden rule; I just wish that he would implement it now, from day one. It is barmy to say that we will carry on borrowing for two more years, ratcheting up more debt, undermining the competitiveness of the economy and causing those who are thinking of investing in gilts to demand a higher rate of return. I am glad that the rate of return that is being demanded on long-term investment in the British economy has dropped by a few fractions of a per cent., but our level of borrowing is likely to continue to be consistently worse than the equivalent long-term borrowing rates in Germany and our other major competitors. I want much firmer action to be taken on debt.
The Opposition are making a big row about the windfall tax, but every City analyst who studied it said that the utilities could stand a tax of £10 billion without any problems, and we are taking only half that. The Tories should all be celebrating the fact that we have been so lenient. We could have taken the other £5 billion and used it to stop Government borrowing. We could have returned to the golden rule, and stopped all borrowing to cover revenue expenditure. That would have enabled us to build up the long-term strength of the British economy and to lower long-term interest rates, thus creating a better climate for investment.
I cannot believe that we are reducing corporation tax; it is almost as though the Chancellor has lived on another planet these past 18 years. Tory Governments have consistently cut the tax that the corporate sector has to pay, always saying that they were creating a climate in which people would be encouraged to invest, and it has always failed to happen. There is clearly not the slightest evidence on the basis of the past 18 years' experience to suggest that it would happen.
Mrs. Thatcher genuinely believed that, when she came to power in 1979, by slashing corporate tax, undermining trade union bargaining power, holding down wages and creating the highest profits in real terms that the corporate sector had ever had, she would unleash an entrepreneurial spirit, and British capitalists would rush out and turn us into a miniature version of America, expanding and investing; but it did not happen.
What did people do? They took the money. They paid it out in dividends, largely because our company laws leave everybody running a company in fear that Lord Hanson will come along if they do not constantly jack up dividend


payments, irrespective of the state of the company. There is no evidence to suggest that cutting corporate tax will encourage investment.
It would be much better to increase corporation tax and say to every company that we will give them 100 per cent. tax rebate on real investment. I am delighted that we are increasing tax relief for small and medium firms from 25 to 50 per cent. We should give 100 per cent. for every company in Britain, to increase our productive capacity and create real jobs to put people back to work. That cannot be done simply by dangling the carrot of further tax cuts; we need a bit of stick to wield over the City and Britain's corporate sector, to encourage them to invest.
I know exactly when things went wrong in investment. In 1955, investment was 15 per cent. of gross domestic product. It built up to 22 per cent. under the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), until his Government shifted our tax law: until 1973, there was a presumption in favour of investment, our tax laws were geared to that, and investment picked up virtually year by year; his Government removed the presumption and left the tax system wholly neutral, and we have declined back to 15 per cent.
The Chancellor's Budget is wanting in those areas. My worry is that if all those factors come together, if the world economy does not surge forward, if the consumer boom becomes unsustainable, if Government debt does not come down as rapidly as we would like, and if the corporate sector does not invest, we may have to make difficult and painful choices a year or 18 months ahead, and, once again, a Labour Government in mid term may struggle and become unpopular.
I remember what Iain Macleod once said about the Budget that is cheered on the day being the Budget that is cursed six months later. I sat among my colleagues and heard them cheering, and the nasty thought occurred to me: has this Budget done more to encourage the prospect of Labour's second term, which we so desperately need? If anything, I think that it has created an element of risk that has endangered that prospect. Many of my colleagues who cheered today may live to regret the fact that the Budget was not bolder and firmer in tackling our institutional problems.

Mr. John Wilkinson: We have had the privilege of hearing six maiden speeches today; not, I hasten to add, from the hon. Member for Brent, East (Mr. Livingstone). He is the opposite of a political innocent, but he brought to the debate the authenticity of his real-life political experiences.
When I said that we had heard six maiden speeches, I included that of my right hon. Friend the Member for Richmond, Yorks (Mr. Hague), who today made his maiden speech in debate as leader of our party. To reply to the Budget statement is one of the most demanding tasks to face any Member and I hope that my right hon. Friend will not think me condescending when I say, as a former Yorkshire Member, that, in such extraordinarily difficult circumstances, he produced a speech of great succinctness and clarity. He gave heart to many Conservatives who have looked for leadership and direction for far too long.
If one is blessed with a name that begins with the letter W, as I am, from time to time we tend to find ourselves called to speak towards the end of debates. Today is no

exception and perhaps it gives me the opportunity to make a winding-up speech from the Back Benches, since there will be none from the Front Benches today, and to say some nice things for the record about some particularly good maiden speeches. I include in that those made by Labour Members.
The hon. Member for Eastwood (Mr. Murphy), who is less craggy and cleaner shaven than his respected predecessor, Allan Stewart, brought a similar sense of commitment to his constituents. He will obviously make a serious contribution to our proceedings. My hon. Friend the Member for Witney (Mr. Woodward) made a fluent speech which was notable for his confident delivery. We shall certainly hear much more from him as his natural enthusiasm will be energetically deployed in criticising much that will prove worthy of criticism in Labour's programme, and possibly more.
We then heard a speech from the hon. Member for Weston-super-Mare (Mr. Cotter), who spoke with knowledge and experience of small business. He was followed by the hon. Member for Brentwood and Isleworth (Mrs. Keen), who told us that she had fought the seat three times. In her case, it was not just an example of third time lucky because she will be able to teach us all how to nurse a constituency. She brought to the debate a warm heart and professional experience in medicine which will be most appreciated in our debates on the health service.
My hon. Friend the Member for North Norfolk (Mr. Prior), who is in his place, likewise made a big-hearted contribution. How nice it was to hear him speak so well of Sir Ralph Howell. How good it is that my hon. Friend brings to the House experience of manufacturing industry. He clearly has a deep love of his constituency and the countryside. He will prove a very worthy successor to his constituency and his paternal predecessors.
At the beginning of my remarks about the Budget, I should declare an interest as the director of a small company. The Chancellor made a grandiose start when he spoke about the United Kingdom rising to the challenge of the global economy. Having heard his speech, however, I understand that he has firmly set his sights on placing the British economy within the overall European one. It is not the kind of dynamic model which we should follow.
When the right hon. Gentleman announced his much-vaunted reduction in VAT on domestic fuel—how right it is that he did achieve at least a 3 per cent. reduction in it—he also vouchsafed the admission that were it not for the European Union he would have abolished VAT on domestic fuel. This is evidence of how our sovereignty is slipping away to the European Union and how the living standards of our people are suffering. The Chancellor made no mention of the opportunity cost to the British economy that is related to our contributions to the European Union. Nor did he go in depth into the implications for the sovereign running of our economy of handing monetary policy over to the Bank of England as a precursor, potentially, to handing it over to an independent European central bank.
There were some positive measures in the Budget statement. First, there was the determination to reduce public borrowing. However, as the hon. Member for Brent, East observed, would it not have been much better to set a clear target for the elimination of public borrowing


and the creation of a public sector debt repayment? This could reasonably have been achieved, and is a hallmark of the tiger economies in the global economy, to which the Chancellor referred, which we badly need to emulate.
Secondly, I welcome the reduction of corporation tax by 2 per cent. for both large and small companies. I regret that no threshold was instituted for the payment of corporation tax by the smallest companies, because they grow so much from retained profits. Thirdly, there was the doubling of tax relief for a year on capital investment in plant and machinery for small and medium-sized companies.
A fundamental deficiency in the Budget statement is that the Chancellor does not recognise the important role of private savings and private investment in the generation of growth in the tiger economies. We need greatly to increase the private savings ratio. To that end, I hoped that instead of announcing a review of the operation of capital gains tax, the Chancellor would have been bold—through we could not expect this from a socialist Chancellor—and announced abolition of capital gains tax and inheritance tax.
On the global economy, none of the tiger economies would do anything so rash as to institute a windfall tax on profitable enterprises that have been recently privatised. Those enterprises are not utilities; many are already global companies competing in the global marketplace. I take an example of particular relevance to my constituency. Many of my constituents work at Heathrow airport for companies such as the British Airports Authority. BAA is par excellence an international company in that it provides services not only for British Airways and British carriers but for international airlines that wish to use British airports such as Heathrow, Stansted and Gatwick. The imposition of a windfall tax may cost jobs. It will certainly diminish BAA's profitability and its ability to invest in schemes such as the fifth terminal, which is crucial to Heathrow's long-term competitiveness against other European gateways such Frankfurt, Amsterdam and Paris. Higher landing charges may ensue. All those potential consequences are wholly negative.
The tiger economies do not have the arcane and highly complex tax system of the United Kingdom. I was deeply disappointed that the Chancellor introduced no measures to simplify our tax system, which is replete with reliefs and allowances. Even the workfare scheme and the welfare-to-work provisions are not in the spirit or the practice of the tiger economies. Those economies do not achieve their very low rates of unemployment through subsidies, but by generating enterprise across the board.
I do not wish to be parochial, but the Budget will hit my constituents particularly hard. I mentioned the British Airports Authority and the consequences of the proposed windfall tax on the privatised utilities. The reduction of mortgage interest tax relief to 10 per cent. may seem minor, but for many of my constituents in outer London, whose family budgets are stretched to the limit, it is a matter of considerable consequence.
My constituents will also be affected by the increase in duty on motor fuel. They do not all travel by public transport; many have to rely on using their cars on greatly over-congested roads and the provision will create an

additional burden. It is not even as if the Budget contained a commitment to higher investment in London Underground or the railway network. On the contrary, Railtrack will suffer under the windfall tax.
I heard what the hon. Member for Brent, East said about stamp duty, but there are a great many properties in my constituency worth more than £250,000. The families who are moving into them are often fully stretched. The Budget will bring higher duties on motor fuel, tobacco and alcohol; there will inevitably be higher council taxes. The Budget contained no indexation of personal allowances and no upward indexation of tax bands to take account of inflation.
The tiger economies are noteworthy in their encouragement of private provision, but this Budget penalises the most vulnerable section of the community—those who are over 60—for their thrift and for providing for their health care through private medical insurance. The impost is particularly vindictive, and one which I would not have expected from a son of the manse.
The Chancellor intends to impose environmental taxes on British industry. I am all in favour of those taxes as long as they are multilaterally applied. British industry should not be singled out. Through vigorous international action, we must ensure that taxes are imposed as uniformly as possible among our competitor nations to ensure that industrial polluters and despoilers of the environment are taxed appropriately.
To conclude, the Budget is deeply depressing. I was especially depressed by the early raid on the contingency reserve. If the Chancellor wanted to establish a reputation for fiscal rectitude, it would have been so much better had he not made that raid. It was especially depressing that public spending will not be reduced sufficiently to eliminate the budget deficit. The Budget will be particularly depressing for my constituents and for the many others whose living standards will suffer.

Jacqui Smith: Thank you, Mr. Deputy Speaker, for giving me the opportunity to make my maiden speech in this important debate on the first Budget of a new Labour Government.
It is an additional honour when one can claim to be the first Member of Parliament for a new constituency, but I shall pay tribute to the hon. Members who previously represented my constituents. The town of Redditch was previously part of the Mid-Worcestershire constituency and was therefore represented by the current right hon. Member for Bromley and Chislehurst (Mr. Forth). It has been said that, with 101 women Members on Government Benches, they will become far more colourful; however all hon. Members would agree that the former right hon. Member for Mid-Worcestershire played a significant part in bringing colour to these Benches as a Minister in the Conservative Government, with both his speeches and his ties. I am sure that he will continue to express his forthright views from the Opposition Benches.
The villages of Inkberrow and Cookhill were previously part of the constituency of Worcester and were represented by the current hon. Member for Mid-Worcestershire (Mr. Luff). He is an enthusiastic and lively Member and I know that people in Inkberrow and Cookhill appreciated his interest in their communities and related issues. I am sure that he will continue to speak up for Worcestershire.
I pay a special tribute to my most recent Labour predecessor in Redditch, my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis). He won an historic by-election in the seat of Redditch and Bromsgrove in 1971. During our campaign, we were fortunate to have my hon. Friend coming to help us on several occasions. He is still widely recognised in the town and it was a particular honour for me when a gentleman we met described me as "the new Terry Davis". My aim as the new Member of Parliament for Redditch is to serve local people as diligently and effectively as my hon. Friend did—a tall order for any Member, new or old.
It will also be my duty and pleasure to put Redditch and the surrounding villages of Inkberrow, Cookhill and Feckenham firmly on the map. Although Redditch was designated as a new town in 1964, it already had a population of 29,000. That figure has more than doubled since that time to the present day, but people and buildings from the old Redditch remain. The mix of old and new gives a sense of history, linked to a vibrant and forward-looking town. Having welcomed so many newcomers, the people of Redditch are friendly and tolerant. We shall stand up for our town and its interests, but we shall embrace the opportunities offered by the new Government with enthusiasm.
I hope that hon. Members will visit Redditch, especially the site of Bordesley abbey where, in the 12th century, Cistercian monks set up home. Nearby, the Arrow brook flows through a layer of red clay, thereby giving the early derivation of the name—red ditch. Hon. Members could also visit the Forge Mill national needle museum, which tracks the development of industry in Redditch through needle-making and the production of fish hooks to spring manufacture. That is still an important industry in the town today.
The town's industry has not depended on past successes. Through the hard work and skills of local people, the innovative work of Redditch borough council in economic development and the continuing support of Redditch and Bromsgrove business link, local industry has diversified. The Chancellor's announcements on corporation tax and capital allowances will reassure the Redditch business community that the new Government will support and encourage its efforts.
In Redditch, we combine an entrepreneurial spirit with a social conscience. The town boasts two credit unions, supported by the borough council and run by volunteers. The town is also launching an innovative mutual guarantee scheme for small and medium-sized businesses, which will provide guarantees for business loans on a co-operative basis. I am sure that such initiatives will be supported by the new Government, who believe that social justice and economic prosperity are integrally linked, as we have clearly seen in the Chancellor's statement today.
As a new town, Redditch has a young population—more than one in three people are under 25. Those young people are the future of our town and our local economy. But 561 of them are without a job or training. That is a waste of lives and talents. They will form a wasted generation unless they can work and train. Those young people will welcome the announcement in the Chancellor's Budget statement that the windfall levy will be used to provide real opportunities to work and train. Young people to whom I speak in Redditch want the

chance to make something of their lives. Today, they have been offered that chance. The Chancellor has announced four high-quality options for work and training.
That is not just another scheme or an attempt to massage the unemployment figures. Those opportunities, and the personal support and guidance that will accompany them, will offer young people a real choice. Young people voted Labour in large numbers on 1 May in Redditch and throughout the country, and today the Chancellor is repaying their trust.
I am also honoured to represent the villages of Inkberrow, Feckenham and Cookhill. Those are excellent communities where local people often work hard to support their villages. Those areas are not always, however, a rural paradise for the people who live in them. There are important issues, to do with housing, transport, jobs and business, and the fear of crime, which I will make it my job to raise in the House. I was particularly pleased to learn that Wychavon district council, which covers the rural part of my constituency and is under new political control, is implementing an anti-poverty strategy. There is real poverty in rural areas and we must not allow it to continue to be hidden.
Hon. Members may also he interested to learn that some people believe that Inkberrow village is the model for Ambridge in "The Archers". I was intrigued to read a letter in the Radio Times the other week, complaining that Pat Archer had greeted the election of a new Labour Government with such delight. While I cannot vouch for the support for new Labour of Jack Woolley or Brian Aldridge, and I am sure that we would positively discourage any support from Simon Pemberton, I can assure hon. Members that there are many people in rural areas who welcome the election of a new, truly one-nation Government, urban and rural. It will be my pleasure to represent the common interests of all my constituents, while also recognising their distinct communities and needs.
The Chancellor has spelt out clearly the new Government's taxation principles. A tax system should encourage work and long-term investment, and should be fair and based on ability to pay. The most unfair tax imposed by the previous Government was VAT on fuel. That tax fell on 2.5 per cent. of the disposable income of the most well-off families, but it fell on 12 per cent. of the disposable income of the poorest families—a clearly regressive tax which caused distress and fear among poorer families. It would now be imposed at 17.5 per cent. were it not for the work of my hon. Friends in the previous Parliament, and the good sense of the electors of Redditch. The Chancellor's announcement today on that tax is another clear sign that the new Government will promote fair taxes.
Some people try to justify the tax on environmental grounds, but for an elderly person or a family with young children, heating the home is not a luxury which they can or should cut down on to save money. One reason why we spend so much on heating our homes is the poor state of much of our housing and insulation. How much better it is to give young people opportunities to work in the environmental task force, and local councils the opportunity to repair and insulate homes through the use of capital receipts. That is the proper way to ensure fuel efficiency—not freezing our elderly and our young families with regressive taxation measures.
I welcome the Chancellor's statement today. It makes a vital start on delivering the promises that I made to the people of Redditch in the election campaign: action on jobs and opportunities for young people; tough rules on Government borrowing to maintain stability in the economy; a taxation system based on fairness; and support for our schools and hospitals. Not only did our new Chancellor hit the ground running, but today he has clearly shown that he is prepared for a record-breaking marathon.

Mr. David Amess: It is an honour to follow any maiden speech, but it was a special honour to follow the excellent maiden speech of the hon. Member for Redditch (Jacqui Smith). She spoke with great fluency and warmth about her constituents and showed good humour. I am sure that I speak for hon. Members on both sides of the House when I say that we wish her well in the years—at least until the next general election—during which she will serve Redditch.
It would be remiss of me not to mention the other five maiden speeches. I believe that I have heard most of them from near and afar. They were made from all parts of the House, and all those Members should be congratulated on their speeches. The father of my hon. Friend the Member for North Norfolk (Mr. Prior) would be rightly proud of the way in which his son delivered his maiden speech today. I owe my hon. Friend's father a great debt of gratitude, because GEC Avionics is in my former constituency, and he did a magnificent job in attracting new jobs and investment to that firm.
There endeth the pleasantries, because I should now like to discuss the Budget. Tomorrow morning, in my constituency of Southend, West, I shall attend a Budget breakfast meeting, organised by the excellent chamber of commerce and a firm of accountants. In my Budget breakfast speech, I shall say that I believe that this will prove to be a rotten Budget, delivered by what I am sure by the end of this Parliament will prove to be a rotten Government.

Mr. Paul Tyler: It takes one to know one.

Mr. Amess: The hon. Member for North Cornwall (Mr. Tyler) says, "It takes one to know one." Perhaps I may deal with a point of order at this moment. There seems to be some row about the seating arrangements in the Chamber, and just—

Mr. Deputy Speaker: Order. Any points of order are for the Chair. That matter has been dealt with. I suggest that the hon. Gentleman gets on with his speech about the Budget.

Mr. Amess: With regard to the Budget, Mr. Deputy Speaker, I am very pleased to be surrounded by Conservative colleagues. I am not so pleased to be surrounded by Liberal Democrat Members. They power-share on Essex county council and on Southend-on-Sea borough council, so I have not the faintest idea why they are sitting on the Conservative side of the House. They would

be better placed to sit with Labour Members—they have much more in common with them than with Conservative Members.
There was an air of triumphalism among new Labour Members as the Chancellor delivered his Budget statement. Their faces lit up at each new announcement. They were watching our faces and thinking that we were being caught out in a range of measures, but it was laughable to describe today's self-indulgent, patronising Budget as the people's Budget. The Labour party manifesto said:
New Labour is not about high taxes on ordinary families".
As I look at the Labour Benches, I am not sure what Labour Members now know about ordinary families because, far from representing the working classes, it appears to me that they have much more common with the middle and upper classes. They have nothing in common with the working-class people whom they represent.
The Budget offers working people nothing. The posters that were deployed in the four-week general election campaign told us that there would be no tax rises, but, however they are dressed up, today we had 17 tax rises. Those 17 tax rises are equivalent to a 3p increase in the standard rate of taxation, so immediately new Labour Members have let their constituents down. They have broken their promises.
Of the 659 constituencies, Southend, West is 31st in terms of senior citizens. Pensioners in Southend, West have been badly let down by today's Budget. We are all on life's journey; no matter where we are on it, everyone's life is important. The fact that senior citizens are somewhat more advanced on that journey means that they deserve the same treatment as anyone else. All hon. Members will have received a brief from Help the Aged on pensions and income, health care and social care, housing standards, mobility and independence. Many new Members turned up at the tea party that Help the Aged gave us. Nothing in the Budget meets any of the points that that charity put to us just last week.
I note that the Economic Secretary is in her place. I understand that she worked for Mr. Robert Maxwell, so I am surprised at the direct attack that has been made on pension funds and pensioners today. It is bad news for my constituents in Southend, West.
We then heard about the employment programme. I accept that it will create some jobs temporarily, but the minimum wage and the social chapter will destroy jobs permanently. I dare say that we shall hear more on that issue tomorrow. The programme will result in work to welfare, not welfare to work.
In September, the leader of the Labour party said:
We have no plans to increase tax at all.
The present Chancellor said:
There is no black hole for the Labour party because we have no public spending commitments that require extra taxes.
There seemed to be no harmony on the Labour Benches today. The hon. Member for Brent, East (Mr. Livingstone), who has left his place, mentioned horrendous Budgets. Through his stewardship of the Greater London council, he is an expert in horrendous budgets. Neither he nor the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) seemed to be in accord with anything that the Chancellor said today.
Even before the Budget, the Labour party gave the game away. Its manifesto did not say that it would hand over stewardship of the economy to the Governor of the Bank of England. That says it all. If the Labour party honestly believes that the British people are daft enough to allow it to get away with pushing responsibility on to the Governor of the Bank of England, it is in for a big shock. Then to humiliate the Governor in the Chancellor's Mansion House speech, by saying that if the Governor gets the inflation forecast wrong, he must write out 100 lines and apologise to the British people, is irresponsible.
The newly elected Government will parrot for the next year or two that everything is the fault of the Conservative party over the past 18 years, but it is the newly elected Labour Government's responsibility to manage the economy well, because all the hopes and aspirations of hon. Members depend on their management of the economy.
Since 1 May, we have already had two interest rate rises, which have damaged the living standards of a range of people. They have damaged small businesses and those who pay mortgages. Today, the housing market has been further damaged by the Chancellor's announcement on MIRAS. Again, we heard further hypocrisy from the Labour party. Speaking about MIRAS, the leader of the Labour party said last year:
if we cut it, it will add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes.
The cop-out from the Labour Chancellor today was that as the Conservatives had done it, it was okay for Labour to continue. That is not what the present Prime Minister said last year. The Chancellor has a short memory.
There is to be a new scheme forcing insurance companies to pay for medical services for road accident victims. That is an additional medical levy on vehicle owners. Through raised insurance premiums, all vehicle owners will be forced to pay twice for medical care. I wonder what will come next.
We heard a throw-away announcement about capital receipts. The Conservative Government said that capital receipts could not be released until local authorities had paid off their debt. No detail was given about that today. We heard about the new house building programme that everyone will apparently rejoice at, but as there has been such a furore about the green belt being destroyed in Essex, I hope that Labour county councillors there will articulate clearly where all those new houses are to be built.
I noticed two more so-called causes for joy among Labour Members. There was an announcement about the health service, which the hon. Member for Brentford and Isleworth (Mrs. Keen) touched on. Labour Members were pleased at the announcements about health spending and about education. What was announced today with regard to the health service was no more and no less than the Conservative Government were pledged to do.
When it was announced that £1.3 billion would be spent to improve the fabric of our schools, Labour Members rejoiced. However, the Chancellor said that that £1.3 billion would be spent over the lifetime of this Parliament, so about £250 million will be spent each year, which will certainly not meet the expectations of all—

Mrs. Ann Keen: Having worked in the health service for the past 20 years, I can assure the hon. Gentleman that

the contribution is welcome. It is the first time that money is being put into patient care, rather than management bureaucracy, which far exceeds any management facility that the health service needs. At last the health service is back on track. Ask any health worker—the hon. Gentleman is looking at one.

Mr. Amess: I respect the hon. Lady's expertise with regard to the health service. However, I was not impressed when the new Secretary of State for Health wrote to hon. Members stating that the money saved through the removal of the internal market would reduce waiting lists. I do not see how that can be delivered.
I seized on the fact that for the first time we have three Ministers of State in the Department of Health. Four of the new Ministers are based in London. Unless we tackle the London problem—the hon. Lady has a vested interest in that—none of the difficulties of the health service will be sorted out.
The Budget is extremely disappointing. It is not fair to ordinary families. The British people deserve better than they got today.

Ms Joan Ryan: I am grateful for the opportunity to make my maiden speech in this important debate. I congratulate all hon. Members who have made their maiden speeches today, especially my hon. Friends the Members for Redditch (Jacqui Smith) and for Brentford and Isleworth (Mrs. Keen).
I congratulate the Chancellor of the Exchequer, my right hon. Friend the Member for Dunfermline, East (Mr. Brown) on his first Budget. It is, as he promised, a Budget to serve the many and not just the few. His welfare-to-work proposals are radical, far reaching and extremely welcome. They will be welcomed across Britain, and they are particularly welcome in Enfield, North.
I shall say a word about my predecessors. The House will know that my immediate predecessor was the right hon. Tim Eggar. He served Enfield, North from 1979 and served as a Government Minister continuously for 12 years. I am sure that we all wish him well in his chosen career change, working in industry and commerce.
From 1974 to 1979, Bryan Davies served as the Member for Enfield, North. He is remembered with affection as a man of integrity who worked hard for the people of Enfield, and I hope to follow his example. I have the honour to be the first woman Member to serve Enfield, North.
I shall spend a few moments, as is traditional, telling the House a little about my constituency, which is one of contrasts. It is London's most northerly constituency and is fortunate to have much designated green-belt land. The Countryside Commission has stated that the finest landscapes in the Greater London area are generally acknowledged to be those such as Enfield Chase. I readily agree with that view. I intend to work hard with local groups, notably the Enfield Preservation Society, which has done so much over the years to safeguard the nature and character of Enfield.
Enfield Chase and areas such as Forty Hill served as royal hunting grounds for over 400 years. Both Henry VIII and Elizabeth I often hunted in the area. No hunting


takes place there now. Today, the unique characteristics of the area, and historic buildings such as Forty hall, are enjoyed by all members of the population and by many from further afield.
Enfield town is at heart a traditional English market town. Eastern Enfield, in contrast, is a much more urban scene. It is an area shaped by industry. It is the part of Enfield that gave the world such things as Belling cookers, Scrabble and the Lee Enfield rifle. The disappearance of much of east Enfield's old manufacturing industry has brought its problems and the area now has assisted area status. It is thanks to the efforts of our Labour Member of the European Parliament, Pauline Green, and the local authority, that regeneration is beginning to take place through the use of objective 2 funding and the single regeneration budget.
Ponders End may be known as the birthplace of Lord Norman Tebbit, or perhaps because Kenneth Horne and Kenneth Williams brought it to the nation's attention in their many references to it in the 1960s radio series entitled, "Round the Horne". Ponders End's chief landmark was the gasworks, and the area was perhaps thought graceless. That is no longer the case because these days it is a most salubrious place. Indeed, it is home to my constituency office. Like the rest of Enfield, North, it is populated with warm, welcoming and energetic people who have a strong sense of community. These are people and communities that I am privileged to represent.
Enfield, North has a diverse population. Diversity is evident in culture, ethnicity, language and religion. More than 30 languages are spoken by children attending schools in my constituency. Discrimination undoubtedly exists in employment opportunities, but the enterprise of Enfield residents has seen many new businesses come into being from the talents of people of all backgrounds.
I have spoken to many people in the Cypriot community, for example, who have made a significant contribution to the economy of Enfield and of north London generally.
Unemployment among some groups—notably youths and black and Bangladeshi groups—remains disproportionately high. The measures that my right hon. Friend the Chancellor of the Exchequer announced today will bring real hope. There will be a new future of hope for all my constituents, either as the recipients of opportunities for training and employment or as parents or grandparents, whose aspirations for their children and grandchildren will be better served by the Budget.
Enfield, North is one of the major centres of industrial activity in London. It has particular strengths, including an advantageous location, excellent communications, a manufacturing base, a reliable and skilled work force and a resilient enterprise culture with a strong small business sector. Over the past decade, however, many locally established manufacturing companies have either closed or announced major redundancies—Belling, Royal Small Arms and Ferguson, to name but a few.
Annual employment data demonstrate that in my constituency there has been a shift away from manufacturing, transport and communications into service sector industries such as financial services. Although we value and encourage those new directions, the gradually disappearing manufacturing and production base has also meant the loss of skilled apprenticeship opportunities.
Young people in Enfield, North are keen to get on. Participation in full-time education among 16 and 17-year-olds in Enfield is slightly higher than the level for London as a whole, and significantly higher than for England as a whole. Yet some 47 per cent. of the long-term unemployed in Enfield are in the 18 to 24 category. When they complete their education, they do not have the training and employment opportunities that they deserve. We look to the Budget proposals to break that logjam.
Unemployment is one of the major sources of instability in our society. It has a very real impact on the health and welfare of individuals. It creates stress for them and their families and can lead to a wide range of problems, including debts, homelessness and family breakdown.
The new deal offered in the Budget will raise both the education and skills level of our young people and, in doing so, will not just fulfil a social need but play a key role in improving the competitiveness of the British economy and raising the long-term growth rate. The defining characteristic of this new deal is choice—choice for young people who will be offered four high-quality options—but, rightly, no fifth option of passive reliance on benefits.
Young people—indeed, the whole community—will welcome the opportunity that the welfare-to-work Budget opens up for them. Enfield, North is well placed to take advantage of those opportunities. Middlesex university and Enfield college can offer training and day release courses. Capel Manor, Greater London's only specialist college of agriculture, has an excellent record of working with the long-term unemployed and helping people back into worthwhile employment. Enfield, North contains the Lea Valley innovation centre. Its task is to tap the financial, physical and human resources of the Lea Valley to stimulate the creation and expansion of innovative technology-based small and medium enterprises.
In terms of large enterprises, it is significant that Ford announced on 12 June, after a meeting with my right hon. Friend the Prime Minister, that it will invest £40 million in its plant in my constituency to provide new production facilities. I very much welcome that positive news. I also welcome Ford's commitment to back the Government's welfare-to-work programme and to seek further meetings with the Government to discuss what role it could play. Indeed, Ford already runs a scheme that takes on 100 young people each year. The welfare-to-work programme will succeed with such co-operation from the private sector.
Members of Parliament have a leadership role in their local areas to bring together the private sector, the Government and all other agencies to work towards the goal of getting long-term unemployed people off benefit and back to work. That is my primary objective in Enfield, North. Only through the partnership approach of welfare to work can a solution be found to the cycle of deprivation and welfare dependency that is so prevalent in Britain's towns and cities.
Other partners have an important contribution to make to the success of this new deal. In Enfield, they include the North London training and enterprise council and the very active and well-organised chamber of commerce.
The windfall levy is entirely fair. It is based on the fundamental principle of social justice. We have seen the size of the profits on which the tax will draw. Given how


the tax will be used, it is wholly right and wholly justified. It is a tax which will pay for a future. It is what the British people so overwhelmingly endorsed on 1 May. It is the new Labour Government delivering on their promises.
I welcome the Budget; Enfield, North welcomes the Budget; and I commend it to the House.

Yvette Cooper: Mr. Deputy Speaker, thank you for calling me during this historic debate. I am honoured to be uttering my very first words in the House on behalf of the people of Pontefract and Castleford on Budget day. This is Labour's first Budget for 18 years—and what a Budget. It is hard to know where to begin: resources for education and health, help for the young and for the long-term unemployed, measures to calm growth in consumption, boost for investment or help with child care.
It is also an honour to conclude the debate today, and to hear so many maiden speeches. We have had such speeches from my hon. Friends the Members for Enfield, North (Ms Ryan), for Redditch (Jacqui Smith), for Eastwood (Mr. Murphy) and for Brentford and Isleworth (Mrs. Keen), and from the hon. Members for Witney (Mr. Woodward), for Weston-super-Mare (Mr. Cotter) and for North Norfolk (Mr. Prior). We have had a tour of the country, and we have heard how the Budget will affect people across Britain. It is truly a people's Budget.
Almost 100 years ago, Lloyd George launched his people's Budget for this century. Now we have a new people's Budget to begin the next century. I congratulate my right hon. Friend the Chancellor on a wise and radical Budget. It faces up to the long-term problems of the British economy. It also takes immediate steps to tackle some of the deep-rooted inequalities faced by my constituents.
I represent a corner of West Yorkshire which is proud of its industrial heritage and its hard-working people; the liquorice fields and factories of Pontefract; the potteries of Castleford; the pits—the heart and belly of the constituency; the power station at Ferrybridge; the glassworks and the chemical works of Knottingley and Castleford; and, near the corner of Normanton that I represent, a Japanese electronics factory.
These past two decades have been hard times in my constituency. Many of the pits are now closed, jobs in traditional industries have gone and, most important, we lack new investment and help to reskill the work force to generate new jobs to replace the old ones that have gone.
I must report to the House that 2,600 people in my constituency are officially unemployed: a third of them have been unemployed for more than a year. The number of people not working, either because they have been forced into early retirement or on to sickness benefit, is much higher. Too many of my constituent have not had their fair share of opportunities to learn and to obtain the qualifications that they need to prosper in a modern economy. That matters for the future, as one generation follows in the footsteps of another. Evidence shows that the chance of the sons and daughters of miners in my constituency becoming high earners when they grow up is a mere tenth of that of the sons and daughters of well-educated and wealthy professionals. That figure is shocking.
The House must not misunderstand me. It is true that my constituency is plagued by unemployment, but I represent hard-working people who are proud of their strong communities and who have fought hard across generations to defend them. They are proud of their socialist traditions, and have fought for a better future for their children and their grandchildren. In the middle ages, that early egalitarian, the real Robin Hood, lived, so we maintain, in the vale of Wentbridge to the south of Pontefract. It was a great base from which to hassle the travelling fat cats on the Great North road.
Centuries later, Pontefract became home to another true fighter for social justice, Barbara Castle. In her autobiography, she describes her politicisation during the miners lock-out in 1921. Through the years, my constituency has been home to other Members who have fought hard for the working people whom they represent in nearby constituencies, including the former Member for Hemsworth, Derek Enright, and my hon. Friend the Member for Normanton (Mr. O'Brien), who has helped me so much in these early months.
The people of Pontefract and Castleford owe most to the man who represented them for the past 19 years, and who battled hard for their welfare, Sir Geoffrey Lofthouse, now Lord Lofthouse of Pontefract. I know that hon. Members will join me in paying tribute to someone who, as a former Deputy Speaker, worked hard for the House, was fair and honourable, and, above all, was a kind man. He governed the House, which can sometimes be rowdy and alarming, with a firm but fair hand.
For some, the traditional tribute to a predecessor is something to be swallowed swiftly, got over as fast as possible. For me, it is an honour and a privilege to be able to pay that tribute on behalf of the House and the people of Pontefract and Castleford to Sir Geoff, as he is known locally.
Sir Geoff was a well-loved constituency Member of Parliament. Like my grandfather, he began his working life in the pits as a teenager. The mischievous among his Pontefract friends describe him as a corner-stint man, but they would never use the same phrase to describe his commitment to his constituents. His proudest achievement was his work for the welfare of the miners with whom he served for so long, getting emphysema recognised as an industrial disease.
I pay a personal tribute to him, too, for Sir Geoff has been extremely supportive during these curious first months here. I hope that we can continue to work together for the people of Pontefract and Castleford, a partnership which I hope echoes the strength of this new Government, young and old, energy and experience, women and men, across the country and across the generations working together for common goals. The Budget gives us the chance to achieve those goals.
More important to my constituents than anything else will be the new deal for the unemployed. In Pontefract and Castleford we are raring to go. Already, the Groundwork Trust in Castleford has approached me with a proposal for an environmental task force. We hope to encourage young unemployed people in some of the highest areas of unemployment in our constituency—in Knottingley and on the Airdale estate in Castleford—to join regeneration projects that are already planned. That way, they can take their first steps into the world of work straight from their own doorstep, be part of rebuilding


their own troubled estates, learning transferable skills and building their own personal pride in their environment and in their work.
We think that this is such a good idea that we are not even waiting for the windfall tax money to come through. A local partnership is already drawing up a proposal for European money, and I hope that we will provide a successful model for the rest of the country to follow. At the same time, Wakefield council is itching to expand on its successful job subsidy programme, Workline, which it has been operating for the past 11 years. Employers there have a year-long subsidy of up to £40 a week to take on unemployed workers.
I asked one employer involved whether he would have taken someone on anyway. After all, his business was expanding. He told me two interesting things. The first was that the subsidy encouraged him to take on a new employee a year earlier than he would otherwise have done. The second was that, without the subsidy, he would not have considered taking on someone who was unemployed. There, in that one anecdote, was the proof that such a job subsidy can speed up job creation and help people in most danger of being locked outside the work force, trapped on the dole, into jobs.
That is important because it means that the new deal gives us a chance to tackle the long-term roots of inequality—people who are trapped on the dole in my constituency. Moreover, by helping those who find it hardest to get work, the new deal also boosts the capacity of the economy. That means that, as the economy grows, instead of running into the old inflationary buffers, as so often happens, we can have growth that creates jobs and more jobs, because we have boosted the capacity. That is

the Budget's greatest strength. At the same time as controlling consumer demand and stopping it expanding too fast, the Budget is boosting the supply side to try to raise Britain's long-term sustainable rate of growth.
I hope that the new deal will receive support from both sides of the House, because it is about our future. In Pontefract and Castleford, I found enthusiasm for these proposals on both sides of the political spectrum.
As recently as Monday morning, a small business man came into my surgery. He admitted to being one of the few people in the area who had voted Conservative for 30 years—until the recent election. However, he said that he was delighted with what he had seen about Labour's plans for young people. He said that he wanted to take on three young unemployed people, asked when they could start, and where should he sign. His enthusiasm was infectious, and I hope that such enthusiasm will encourage more small businesses, both in my constituency and throughout the country, to take up the challenge to provide a new deal for the unemployed. It is something which we all need to work on together.
I am sure that that man will be even more delighted now that he has heard my right hon. Friend's Budget. It truly is a people's Budget—a Budget for social justice and for Britain's future. Tough choices have to be made, but they will generate results in the long run.
Keynes said:
In the long run we are all dead"—
but I say, "So what?" Our children and our grandchildren will still be alive. Therefore, for the people of Pontefract and Castleford and for their children and grandchildren, I welcome the Budget.

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

War Pensions

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]

10 pm

Mr. Peter Viggers: We have listened to an exceptionally good maiden speech by the hon. Member for Pontefract and Castleford (Yvette Cooper), who spoke with great clarity and concern for her constituency. She will find that, in the House, those who speak on behalf of their constituents with knowledge and concern will always win an audience.
In my mere 23 years in the House, I have twice followed maiden speakers. They were both men, and I have followed their future careers with keen interest. The hon. Lady is my first "parliamentary god-daughter", and similarly, I shall follow her career with interest—until the Conservatives can sweep her out of Pontefract and Castleford, which I hope will be as soon as possible.
I am also delighted to see my comparatively near parliamentary neighbour, the hon. Member for Southampton, Itchen (Mr. Denham), as the Under-Secretary of State for Social Security on the Government Front Bench. If we have to have Labour Ministers, I suppose that I am as happy to see him there as anyone else, and I hope that he will listen to my plea on behalf of my constituents. Perhaps he will decide that there is merit in the case.
I welcome the chance to speak on behalf of two of my constituents who, I believe, have been treated inappropriately by Government, which has resulted in profoundly serious damage to them. The issue is connected with an allowance called the allowance for lowered standard of occupation. The acronym for that is ALSO, but I shall refer to it as "the allowance".
I shall quote copiously from a guide to war pensions policy produced by the Department of Social Security. It says:
The original idea behind this allowance, which was introduced in 1946, was to compensate the World War 2 conscript who, as a result of an injury sustained during the war, was unable to follow the civilian job he had had before he was called up. Later, in the 1970s, the law was amended to enable career servicemen who had had no pre-service occupation to qualify for the allowance.
The injury or disablement
must be such as to 'render him incapable, and likely to remain permanently incapable, of following his regular occupation and incapable of following any other occupation which is of an equivalent standard and is suitable in his case".
Of course, those terms need careful definition. "Regular occupation" means
(i) the occupation which was his regular (service) occupation on the date the injury was sustained, or
(ii) the occupation which was his regular (service) occupation on the date he was first removed from duty because of the disease on which his award is based, or
(iii) if there were no such occurrences, the occupation which was his regular (service) occupation on the date he was discharged.
I would interpret that guidance as meaning that one should apply first test (i), then test (ii), and failing those,

test (iii). "Regular occupation" for service after 31 July 1973 means
the regular service job that the claimant was doing at the appropriate date … It is important therefore that the precise service job is identified eg infantryman: electrician: weapons mechanic: cook: clerk: driver: pilot: navigator etc. before consideration is given as to whether the war pensioned disablement renders the ex-serviceman 'incapable, and likely to remain permanently incapable, of following [that] regular occupation".
The note continues:
Where the regular occupation is the service occupation, and the claimant was invalided because of the accepted disablement, it can normally be accepted that he is incapable of following his regular occupation. That will also be the case if, because of the accepted disablement, the claimant was moved from his regular occupation to another job, albeit still in the armed forces.
That is exactly the case in one of my constituency cases. The note concludes:
Occasionally a claimant might argue that although his pensioned disablement did not prevent him carrying on in his regular occupation, he should be entitled to ALSO because he was excused because of his disablement from involvement in certain activities which would normally be expected of all servicemen eg training, exercises/sport. Clearly a marine commando who could not cope with training exercises would be eligible on discharge to ALSO (peak physical fitness being an essential prerequisite for such a job); in that case, it would be very unlikely that he would have retained his job.
The allowance was paid to about 13,500 ex-service men and women until 1996. The maximum amount was £38.12 and those in receipt of it made all their financial plans on the basis that the allowance would continue. Who would contemplate—even in one's worst nightmares—that an allowance granted by the British Government would be withdrawn? Surely such an allowance should be as solid as the Bank of England.
Those receiving the allowance made housing and other long-term plans on the basis of it, and took it into account when taking on mortgages or other debts. To take an extreme example, a recipient of the allowance faced with separation or divorce would make a settlement on the basis of the allowance continuing. The loss of the allowance in those circumstances could lead to real hardship.
For about 1,300 people in receipt of the allowance, their worst nightmare came true. In January 1996, the Department of Social Security informed 1,300 ex-service men that they were to lose their allowance. I have one such letter here, addressed to my constituent Mr. Ken Harding. The letter states:
when we first looked at your claim for ALSO, we made the mistake of considering only whether you could get back into service, and whether your civilian earnings (or potential earnings) were less than your service earnings. What we should have done was to consider whether your pensioned disablement itself actually made you incapable of following your service occupation and any other occupation of an equivalent standard. It has, therefore, been necessary to reconsider your case … We have reviewed your case and have concluded that your pensioned disablement assessed at 6–14 per cent., does not make you permanently incapable of following your regular (service) occupation of aircraft engineering mechanic.
That disablement allowance was for deafness. Mr. Harding became a chief petty officer in the Navy and worked as a supervisor with special responsibility for deck operations on aircraft carriers. He served on a range of ships, and worked on deck with Gannet aircraft, Sea Vixen and Phantom jets and Sea King helicopters.
I wonder whether the person who decided that Mr. Harding was not permanently incapable of following his occupation has ever been at sea during fleet operations. It is noisy and hazardous, with tons of heavy metal catapulting off the heaving deck and back on again. Accuracy and reliability are crucial. To describe him simply as an engineering aircraft mechanic is simplistic and inadequate. Mr. Harding later went on to work at the Royal Navy's aircraft yard in my constituency, working on land on helicopter servicing and repairs. I suspect that the Department of Social Security regarded this as an extension of his service work when they disqualified him from the allowance.
My other constituency case is more bizarre. Mr. Mike Tungate served in the Royal Marine Commandos and reached the rank of sergeant. He was supremely fit and took pleasure and pride in physical activity. In July 1985, he was injured when he was thrown from his motor cycle in an accident that was not his fault. He has since suffered permanent injuries to his shoulder and elsewhere. I have a medical report here from a Doctor Grayson, dated May 1997, which states:
This man's left shoulder injury is likely to continue to be a major disability throughout his life and will I imagine have limited his chances of promotion as he cannot achieve battle fitness.
Another medical report—also issued in 1987—from Mr. Neville Seymour, in Plymouth, states:
His general activities have been severely restricted: he has been unable to undertake battle fitness tests; he cannot lift and hold weapons. He tells me that his service contract has three years to run, but he had hoped to spend another five years in the forces.
The contents of those medical reports are reflected in the armed forces reports on Mr. Tungate. A letter from Major Binnie of the Royal Marines in Plymouth, dated May 1987, says that Mr. Tungate
was medically downgraded to P2 (Modified Commando) on 9 March 1987 as a result of his accident. This means that he must henceforth work in the rear echelons of units and in office jobs. Additionally he cannot undergo Mountain and Arctic Warfare Training nor can he attempt the normally mandatory Basic Fitness Test and the Annual Personal Weapons Test.
Whilst this does not directly affect his fitness for promotion it inevitably damages his prospects. Being ineligible to hold field posts in a Commando Unit denies him the full range of job experience that is an essential part of a man's promotion. Nor is he able to compete effectively with his contemporaries who have the opportunity to gain a balanced career.
Whilst it is difficult to quantify his damage, he has been disadvantaged by his accident and the subsequent medical downgrading. I do not believe he will now gain the width of experience necessary for further promotion.
In the official report on Sergeant Tungate for 1987–88, his reporting officer said—after praising Sergeant Tungate's qualities, his enthusiasm and his excellence generally—
Regrettably, Sgt Tungate's medical condition puts certain restrictions upon him and his career … Sgt Tungate has now been a Sergeant almost 9 years. I am of the opinion that his medical condition and somewhat limited experience in the clerical branch would debar him from being employed as a CSgt (C1)"—
that is, a colour sergeant.
It is with sincere regret that I have to suggest that Sgt Tungate has reached his final rung on the ladder of promotion.

His colonel said:
Sgt Tungate is doing a good job … and I am very happy to have him here but in all honesty for the reasons stated above he has reached his ceiling.
Sergeant Tungate received a letter telling him that he would not be eligible for the allowance for lowered standard of occupation. It said:
We have reviewed your case and have concluded that your pensioned disablement assessed at 40 per cent., does not make you permanently incapable of following your regular (service) occupation of—
wait for it—
clerk".
Later, the war pensions policy unit wrote to me as follows:
Examination of Mr. Tungate's Service documents shows that at the time of his shoulder injury in 1985 his listed trade was that of Clerk, and that he had not been removed from duty on account of his shoulder or other injuries. The WPA therefore determined that his injuries had not prevented him from following his 'regular occupation' up to the time of his discharge
in 1990, and that he was not eligible for the allowance.
A Royal Marines commando was described as a clerk! I suppose that clerking duties are involved; I suppose that a Royal Marines commando must keep an inventory of hand grenades, and make sure that the men have weapons, food and everything else that they need in order to fight—and, of course, he will be carrying his own weapon just in case it becomes necessary for him to fight back. To call him a clerk, however, is completely wrong. The person who arrived at that classification cannot have known about Royal Marines mountain and Arctic training, cannot have know what it is like to patrol the streets of Northern Ireland and cannot have seen the areas in the Falklands across which it was necessary for Royal Marines and others to yomp.
How can Mike Tungate be deprived of his allowance? I repeat that the Department's briefing notes say:
Clearly, a marine commando who could not cope with training exercises would be eligible on discharge to ALSO (peak physical fitness being an essential prerequisite to such a job); in that case, it would be very unlikely that he would have retained his job.
Sergeant Tungate was so highly regarded that he was kept on, in a slightly different role, in the rear echelon. It may be that that act of kindness to him, because of his great quality, deprived him of his allowance. If that is the case, it is quite wrong.
I am absolutely sure that I know the answer in this case. A mistake was made when 13,500 cases were reviewed. The fact that Mr. Tungate continued to be defined as a clerk up to the end of his service led officials to believe that he had not suffered lowered standard of occupation. I am convinced that he had, and that there was a mistake.
The Minister has been provided with a brief, no doubt by the same team of civil servants who prepared the brief from which answers were given to me previously, but I say to the hon. Gentleman—whom I could almost, as a neighbour, call an hon. Friend—that there are cases in which Ministers need to read the brief and form their own decision. That is why we have Ministers and why he and not a civil servant is sitting there.
There has been an error, to the great loss of my constituents. They are fine men who have given devoted service. I plead with the Minister to reconsider and to restore to them the allowance for lowered standard of occupation.

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): I thank the hon. Member for Gosport (Mr. Viggers) for bringing this matter to the House and for his warm introductory words. He has a deep knowledge of service matters and represents a constituency with an unusually high proportion of service and ex-service personnel.
I pay tribute to those former members of the forces who have suffered disablement or death in the service of their country. I also acknowledge the invaluable work performed by the ex-service organisations in serving the interests of former service men and women. My Department keeps in close and regular touch with those organisations, as we recognise the importance of ensuring continuing awareness of feelings and concerns among the ex-service community. Indeed, my noble Friend Baroness Hollis, as the Minister with special responsibility for war pensions, met representatives of the ex-service organisations twice last month.
I would like to set this debate about one supplementary allowance into the context of the war pensions scheme as a whole. The scheme provides a number of allowances to supplement the basic war disablement pension, forming a wide range of financial provisions for disabled ex-service men and women.
Allowances are available in respect of age, unemployability and care and mobility needs arising as a result of war pensioned disablement. Most of the allowances are at preferential rates compared with social security counterparts and some are peculiar to the war pensions scheme. The scheme also provides pensions for the widows and other dependants of ex-service personnel whose death is linked to service.
The allowance for lowered standard of occupation is known in both the ex-service world and official circles by the abbreviation ALSO. I propose to refer to it as such during this debate.
The forerunner of ALSO, which is currently £40.44 maximum a week, was a special hardship allowance introduced in 1946. Its clear purpose was to compensate an ex-service man who, because of injury incurred as a result of service during the war, was unable to do the civilian job that he did before he joined up and had to settle for a job with less pay. The allowance was to help to bridge the gap between his current earnings and those that he had enjoyed in his pre-service occupation. In May 1948, the allowance was renamed the allowance for lowered standard of occupation.
The original allowance was to compensate world war two conscripts where pre-service careers had been adversely affected by their injury. From 1973, the law relating to ALSO was amended to provide for career service men. For those disabled due to service after 31 July 1973, the comparison is made with the pensioner's occupation in service, instead of his pre-service occupation. Under the change, it became necessary for the Secretary of State to determine what the ex-service man's "regular occupation" was while he was in service on whichever of three dates applies in the individual case. Those dates were the date his service wound or injury was sustained; or the day he was first removed from duty because of the disease on which the award is based; or if neither of the above occurred, the date he was discharged.
Subsequently, from April 1978, the conditions were further amended to widen the scope to include war pensioners whose disablement was due to service before 1 August 1973 and who had entered the forces straight from school or higher education after 2 September 1939 and before 1 August 1973. Those pensioners had previously been excluded from consideration of ALSO because they had no regular pre-service occupation.
From April 1997, a new award of ALSO may not be made where the claimant has attained the age of 65; nor may an award be made where the degree of disablement is assessed at less than 40 per cent. With those exceptions, ALSO may be awarded to the war pensioner whose war pensioned disablement is such as to
render him incapable and likely to remain permanently incapable of following his regular occupation and incapable of following any other occupation which is of an equivalent standard and is suitable in his case".
The allowance is therefore designed to compensate the ex-service man who, because of his war pensioned disablement, is unable to follow his regular service trade or occupation and a civilian one of an equivalent standard. It is not intended to provide compensation solely on the ground that his earnings have reduced since leaving the forces. That is a situation often faced by ex-service men because service pay is based on the earnings of comparable civilian occupations, with the addition of what is generally referred to as the X factor in recognition of the special circumstances of service life.
I should explain at this stage that "regular occupation" is interpreted by the Secretary of State as the regular service job that the claimant was doing at the relevant time. It is important therefore that the precise service job is identified, in the same way as it is important for world war two conscripts to identify the precise job the ex-service man was doing as a civilian before he joined the armed forces. The "regular occupation" therefore is not simply "service man" but, for example, as the hon. Gentleman said, infantryman, electrician, weapons mechanic, cook, clerk, driver, pilot, navigator and so on.
Once the precise occupation is determined, consideration is given to whether the war pensioned disablement is such as to render the ex-service man incapable of following that regular occupation and one of an equivalent standard which is suitable for him.
The law does not define what is meant by the terms "equivalent standard" or "suitable", but the Secretary of State interprets that as meaning any other job with equivalent earnings and which is suitable for him taking into account his training, education, experience and physical and mental condition. I should stress that that is a generous interpretation. The earnings comparison is with the level of earnings in the regular service occupation, not with the level of earnings in a civilian equivalent job.
In 1994, it came to light that the legislative provisions for ALSO were being misinterpreted. Some awards had been incorrectly made. Consideration had been given only to whether the man's earnings in civilian life were less than his service wages and whether the man could now get back into service. That led to payments being made where relatively minor disablement had not had any effect on the pensioner's earnings potential or, in some cases, prevented continuation of the service career up to normal military retirement. No consideration had been given to


whether the man's disablement itself actually made him incapable of following his service occupation. I am sure that the hon. Gentleman agrees that it is right that any payments are within the law.
In March 1995, the matter was brought to the attention of the Advisory Committee on War Pensions. It was explained that new awards would be made only where the pensioned disablement would prevent the war pensioner from following his regular service occupation and a suitable equivalent and that existing cases would be reviewed to ensure that existing awards were soundly based in accordance with the legislation. Some awards were eventually withdrawn from a common date of 3 April 1996. All those affected were given at least two months' notice of the withdrawal. None of the ex-service men affected had been discharged from the forces because of their service disablement. All had a full career or were made redundant. They were not asked to repay the money that they had received.
If a service man is invalided out of service on account of his disablement, it can normally be accepted that he is incapable of following his regular service occupation, and ALSO will be payable. That will also be the case if, because of the disablement, the pensioner was moved from his regular occupation to another job in the armed forces. On the other hand, if a service man completes his service engagement in the normal way despite some disablement, it is evident that it did not prevent him from following his regular service occupation and ALSO will not normally be payable. However, if there is subsequently a significant deterioration in the degree of disablement due to service, to the extent that it is judged that the disablement would then prevent him from following his regular service occupation, ALSO may be awarded.
I am aware of the hon. Gentleman's previous interest in this allowance, and in particular of the parliamentary question he raised with his party's Administration in March last year asking what discretion Social Security Ministers have on the payment of ALSO. The answer then, which still reflects the legal position today, was that the Secretary of State would pay the allowance when satisfied that the requirements for it in war pensions law are met.
I am also aware of the previous ministerial correspondence which the hon. Gentleman has had and of his contact with officials from the War Pensions Agency and with departmental headquarters about the cases of his constituents, Mr. Harding and Mr. Tungate. I shall now turn to the cases of those ex-service men.
Neither man was invalided or otherwise removed from duty on account of their pensioned disablements. On the contrary, both continued in their regular service occupations until their discharge on the normal completion of their engagements. I am advised that their respective disablements did not therefore affect their ability to carry out their regular service occupations. Mr. Harding was an air engineering artificer (mechanical) and Mr. Tungate was a clerk. The judgment has therefore

been made that the legal requirements for entitlement to ALSO have not been satisfied. I am aware that both men's awards of ALSO were withdrawn as a result of the review exercise begun in 1994 to which I referred earlier.
The hon. Gentleman suggested that because Mr. Tungate was medically downgraded to modified commando as a result of his shoulder injury incurred in 1985, his promotion prospects were adversely affected. That may or may not be so, but the facts appear to be that Mr. Tungate's regular service occupation when injured was that of a clerk and that his injury did not prevent his carrying on in that occupation for the next five years until normal discharge in 1990, when he made his claim for war pension. If that is the case in the circumstances of Mr. Tungate's claim, the law on ALSO provides that the allowance could be awarded only if he was incapable, because of his war pensioned disablement, of doing the job that he was doing when injured.
The hon. Gentleman made the case that the identification of the occupation of clerk is not appropriate in Mr. Tungate's case. I have no reason to believe that my predecessors were anything less than punctilious in the examination of Mr. Tungate's position. None the less, the case has been made by the hon. Gentleman and I therefore undertake to look once more at Mr. Tungate's case and at whether the identification of occupation was correct, though I would not wish to prejudge the case or hold out any particular prospect of what the hon. Gentleman seeks.
The hon. Member also suggested that Mr. Harding's award of ALSO should be reinstated on the grounds of his occupation and, perhaps, of hardship. Mr. Harding was discharged from the Navy in 1986 and claimed a war pension in respect of his hearing loss in 1991, when his disablement was assessed at 6 to 14 per cent. He received a lump sum gratuity of £3,129 in respect of that disablement and was awarded ALSO following a claim made in 1992. It seems clear that he was able to do his service job with his disablement and the award of ALSO was therefore withdrawn from April 1996.
Mr. Harding has been advised that the Secretary of State has the discretionary power to reinstate the allowance in whole or in part and that the normal policy is to do so where withdrawal of the allowance would result in a real risk to the health of the pensioner or a dependant, or to keeping the family home. The War Pensions Agency has invited Mr. Harding to complete a form detailing his income, capital and commitments and reasons why he believes that the Secretary of State's discretion should exceptionally be exercised in his case, but I understand that he has not done so. I am, of course, in no position to say that he will be successful in getting his allowance restored if he does so.
I listened carefully to what the hon. Gentleman said. I am not convinced of the need to reconsider the matter, but if there is any further evidence on conditions or employment records that he wishes to provide, I will give the matter my further consideration.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.